Monday, November 29, 2010

Turducken? Meh! I want a TurBacon Epic

We survived Thanksgiving with the Unknown In-Laws. The Unknown Wife, her mom, and her sisters are all good cooks, so we easily put on a couple of pounds.

Many of you have heard of the Turducken (a dish consisting of a de-boned chicken stuffed into a de-boned duck, which itself is stuffed into a de-boned turkey).

But these folks have gone several steps better - the TurBacon Epic: a 20lb pig stuffed with a 8lb turkey, a 6lb duck, a 4lb chicken, a cornish hen, a quail, bacon croissant stuffing, and 10 lbs of bacon wrapped around all the layers. It's "only 79,046 calories and roughly 6,900 grams of food coma inducing fat.

To quote Yakov Smirnoff, "What a Country!"

Wednesday, November 24, 2010

New Video on Risk and Return

I've posted a new video on Risk and Return - it covers the typical material presented in and introductory class from the math of risk and return (Expected returns, standard deviations, covariance and correlation) through Markowitz Portfolio Theory and the Capital Market Line through the CAPM and the Security Market Line. it has a table of contents, so you can skip around. Click on the video below to see it - it's a pretty big file, so it might take a while to load.


In case you don't want to view the whole thing at one sitting (it's a bout 90 minutes), the video is organized as follows (I reference the numbers in the Table of Contents):
  1. Sections 1-13 (roughly from the beginning to 38 minutes in - the "math" risk and return (Expected Returns, Standard Deviation, Covariance, and Correlation)
  2. Sections 14-25 (from minutes 38 to 75): Markowitz Portfolio Theory and the Capital Market Line
  3. Sections 26-32 (Minutes 75 to the end): Systematic and Unsystematic Risk, The CAPM and the Security Market Line
I hope you find it useful. Comments (of course) are welcome.

Happy Thanksgiving

It looks like Unknown University is all but deserted the day before Thanksgiving. I finally decided to quit swimming against the tide, and canceled classes for today (I usually only get about 30% attendance on the day before Thanksgiving in the best of times, so it's no big loss).

Instead, I told the students that I'd put up a video with the lectures for the week on Risk and Return. Once it's done, I'll post a link here. I'm pretty happy with it - it runs the gamut of topics from the calculations for standard deviation, covariance, expected returns, etc... to Markowitz Portfolio Theory and the Capital Market Line to the CAPM and the Security Market Line.

Although I don't use all this material in my intro class, I expect to use it in my investments class this spring. So, this should allow me to go a bit faster and cover more material there.

Unfortunately, I have to wait another hour before the video software is done rendering the final version and I can go home. Then it's off the the Unknown In-Laws house tomorrow for turkey overload and football.

Here's wishing you all a Happy and safe Thanksgiving

Tuesday, November 23, 2010

Kissing Up is Good Practice

It's important to be good at the technical aspects of your job. But the "soft" stuff may be even more cirtical - the ability to get along with coworkers (and more important, with bosses) has a lot to do with eventual career success.

Tow researchers (Ithai Stern at Northwestern University and James Westphal at the University of Michigan) recently published a study in Administrative Science Quarterly titled "Stealthy Footsteps to the Boardroom: Executives’ Backgrounds, Sophisticated Interpersonal Infl uence
Behavior, and Board Appointments (here's an ungated copy). They lay out several effective ways of "kissing up" to the boss:
  • Go with discomfort: Preface compliments to the boss with something like "I don't want to embarrass you, but..."
  • Frame it in question form: Ask for advice - it's just as flattering as a compliment. goes down a lot easier
  • Bait and switch: Start out by disagreeing with the boss and then gradually warm to their opinion. Instead of being a "Yes Man", be a "'No,' then 'Yes'" man).
  • Go around the corner: Find a third-party (best if it's a close confidant of the boss), and talk admiringly about the boss. Odds are, it will get passed on.
  • Look for common ground: Pick a topic (anything from parenting to religion to politics) and make unsolicited statements and opinions about the matter that you think are also held by your target. Positive impressions will lower the red-flags on future praise.
  • Look for common groups: Bring up social affiliations that you may have in common.
All in all, pretty clever stuff. Not that I'd ever use any of these, but if I were to...

Monday, November 22, 2010

Happy Thanksgiving From the TSA

Luckily, we're not flying this Thanksgiving - we live a mere 2 hours from our families. But in case you are, here's a pretty funny clip from SNL.


Now take off you D**n shoes!

Monday, November 15, 2010

Annoying or Amusing?

I had the genuine pleasure this past Thursday of speaking to 150 new faculty members in the Virginia Community College System. It is always a treat to work with people at the very beginning of their teaching careers. They have such a wonderful opportunity to help change the world.

One of the themes that I explored with the group was the idea of improvement. If you continue to improve as a teacher, year after year, you will get very good and eventually become great. And, the amount of annual improvement doesn’t have to be huge. In connection with their teaching, I suggested that every person work toward making a mere 5 percent improvement per year. That is doable and at that rate, in not too many years, you can become the best teacher in your building.

However, a great majority of teachers get better for awhile but eventually plateau. Many people who were B- teachers two decades ago are still B- teachers. I find that troubling. Why doesn't a B- teacher eventually become an A+ teacher?

There is a point where it simply becomes easy to say “I am what I am and I am never going to get any better so I’m not even going to try.” As you can imagine, that is not an attitude that I like. As far as I’m concerned, if I am not dead, I should be working to get better.

The question comes up, then, as to what causes a teacher to plateau. I have known a fair share of people who were good teachers and then suddenly began to become disgruntled. After that, they never got one bit better.

When does that happen? I have a theory. When you first start teaching, it is easy to find your students amusing. My students are all about 19 years old and I occasionally refer to them as puppies. They are just beginning to try out the responsibilities of adult life. As with growing puppies, this time can often be a very humorous period of transition.

However, there can come a time when those same students and those same actions can become annoying. A student will say something bizarre and instead of finding it amusing, the professor finds the student’s ignorance to be annoying.

In fact, if a professor ever says to you, “students simply aren’t like they used to be,” that is a clear sign that they have gone from viewing students as amusing to annoying.

If you find students in general to be amusing, then you are willing to do the work that is necessary to continue to improve. Five percent improvement is clearly a possibility. But, if the students have started to annoy you, then improvement becomes a much more difficult task. It is very easy, at that essential moment, to hit that plateau where your days of improvement cease.

So, wherever possible, I try to view the actions of my students as relatively amusing. And, even though they do incredibly dumb things at times, I try to avoid staying in a constant state of annoyance. The reason is fairly obvious. I really do want to get better. I want to get 5 percent better by this time next year. And, that is hard to accomplish if everything the students do seems to annoy you.

Sunday, November 14, 2010

Yo Momma is a Data Miner

Having a lot of data makes research easier - we now have more data in easily readable formats than ever before, and an amazing amount of computing power on our desktops (I have far more horsepower on my desk than NASA had in total in the 1980s)..

Unfortunately, there's a flip side to that coin - we can easily find variables (or specifications) that seem to "predict" returns (or just about anything). In reality, we're often just overfitting the data.

Here's a pretty good piece on the topic titled "Yo Momma is a Data Miner", by David Leinwebber in which he fits a polynomial time-series regression to the S&P 500 with surprising (if you don;t follow what he's doing) good results - particularly since he's using things like the sheep population and Bangladesh Butter production as regressors.

Tuesday, November 9, 2010

I Did Not Know Damodaran Had a Blog

Aswath Damodaran has written a couple of excellent textbooks (on valuation and corporate finance), both of which are among my core reference materials. He also wecasts his valuation class at NYU (available here)

But I didn't know that he also has a blog - Musings on Markets. Just a quick glance over the last couple of months gave me several good articles to read:
High Dividend Stocks: Do They Beat the Market?

Capital Structure: Optimal or Opportunistic?


What if Nothing is Risk Free?

He doesn't update regularly (but who am I to talk). In any event, check it out.

HT: Finance Clippings

Making The Grade

I was cleaning out some to the 1500+ emails I've let accumulate in my gmail account (unlimited space leads to sloppy housekeeping), and I came across this old (but still excellent) piece titled "Making the Grade", by Georgia Tech physics professor Kurt Weisenfeld:
IT WAS A ROOKIE ERROR. AFTER 10 YEARS I SHOULD HAVE known better, but I went to my office the day after final grades were posted. There was a tentative knock on the door.
""Professor Wiesenfeld? I took your Physics 2121 class? I flunked it? I wonder if there's anything I can do to improve my grade?'' I thought: ""Why are you asking me? Isn't it too late to worry about it? Do you dislike making declarative statements?''

...Time was, when you received a grade, that was it. You might groan and moan, but you accepted it as the outcome of your efforts or lack thereof (and, yes, sometimes a tough grader). In the last few years, however, some students have developed a disgruntled-consumer approach. If they don't like their grade, they go to the ""return'' counter to trade it in for something better.

What alarms me is their indifference toward grades as an indication of personal effort and performance. Many, when pressed about why they think they deserve a better grade, admit they don't deserve one but would like one anyway. Having been raised on gold stars for effort and smiley faces for self-esteem, they've learned that they can get by without hard work and real talent if they can talk the professor into giving them a break.

Read the whole thing here - it'll be part of my next semester's syllabus.

Monday, November 8, 2010

We Shouldn’t Take It For Granted

Topic One: On this coming Thursday, I will be having one of the great pleasures of my life. I will be leading a 3 1/2 hour teaching workshop for 150 new teachers in the Virginia Community College System. When you are given the opportunity of working with 150 new teachers, you realize that you are looking at a group that can truly make a difference in the lives of an almost countless number of students for decades and decades to come. This truly is an honor for me.
**

Topic Two: This past Friday I sat in my office for about 30 minutes and talked with an official in the Afghanistan government. That certainly is not a traditional part of my job. However, his daughter is a student at the University of Richmond and he was on campus visiting her. Because I knew the daughter, she brought her father by so we could meet.

We talked about the progress being made in Afghanistan and he immediately started talking about the problems caused by illiteracy in his country. His point was that for nearly 25 years, the country was without a formal education system. First under the Russians and then under the Taliban, schools as we know them were often nonexistent. Can you imagine, he asked, what it is like to go 25 years without education? An entire generation is lost.

Instead of producing doctors, engineers, accountants, and the like who could serve as the leaders to help pull the country out of poverty, an entire generation basically went without education. And, what can most people really do without education? I do not know if this is accurate but I found the following on the Internet: “The overall literacy rate in Afghanistan is reported to be 28.1%; according to an Afghan Ministry of Education report, ‘In rural areas where 74 percent of all Afghans live, however, an estimated 90 percent of women and 63 percent of men cannot read, write and do a simple math computation.’”

That is a staggering set of statistics. If you simply stop and think of how limiting those numbers are for the people, the challenges faced by the entire country seem overwhelming.

How hard it must be to try to create a peaceful, prospering country with those kinds of statistics working against you.

There is a lot of criticism of the educational system in the US and, most certainly, improvements can be made. However, regardless of what you think of US education, no one can deny how important it is to the growth and prosperity of our country. Sometimes it is easy to say “oh, I’m just a teacher” and view the job as unimportant but those of us in education need to constantly remind ourselves of how essential our job is. If you are a teacher, never take it for granted. Our country needs great education. As teachers, we each have students who are depending on us to help them read and learn and go out into the world and make a difference. And, through that learning, they will be able to help continue the building of a great nation.

I couldn’t help thinking, as I sat and talked with the Afghan official, that I wished every teacher could hear what he was saying about the total loss that comes from lack of education. There are a lot of the world’s problems that I cannot do a single thing about. However, when it comes to helping to educate the next generation, that is a challenge that I can personally address—even as soon as Wednesday—when I walk back into class and make a little difference in the lives of my 64 students. I want to be part of the solution and not part of the problem.

Entrepreneurship and Satan's Learning-Challenged Little Brother

Although most people know him as the creator of Dilbert, Scott Adams may also be one of the funniest writers around. Here's a recent piece that appeared in the Wall Street Journal Online where he talks about dissatisfaction as a major driver of entrepreneurship:
I wasn't suffering alone. Many of my co-workers already had active side businesses and ambitious expansion plans. The guy in the cubicle behind me was running a concert equipment rental business. Across from me was a guy running a computer tech support business. We had Amway dealers, Mary Kay sales people, inventors, authors and just about any other business you can imagine. That's not counting all of the business plans in the incubation phase. I think we all understood that working in a cubicle and being managed by Satan's learning-challenged little brother was not a recipe for happiness.
Actually, it was a hamster-brained sociopath of a boss that made me think about going into academia.

Read the whole thing here. - it's good for a laugh (and it makes a lot of good points, too).

Saturday, November 6, 2010

The Fun of The Exam Continues

It seems like every semester, I get at least one student who bombs an exam (or two) and reacts in a way-over-the-top manner. Last semester, it was a senior finance major (with a pretty high GPA) who suffered from anxiety attacks. She drew a complete blank during my Advanced Corporate Finance midterm. She subsequently appeared in several professors' offices wondering tearfully if she should change her major in her senior year. We eventually talked her down off the ledge, and she even subsequently took my Student-Managed Investment Fund class, where she did just fine.

But this semester took the grand prize. The 80/20 rule says that 20% of your students cause 80% of your problems. That would be true this semester if you counted ONE student alone as my 80%. She (we'll call her Brittany henceforth) is to put it succinctly, a bit of a Princess - high maintenance, dressed entirely in designer clothes, vocal, bossy to her friends, and simply not doing well in the class. BP informed me two weeks into the class that she's taking 18 (or is it 20) credits this semester because she needs to graduate this spring. So she "really really really needs to pass this class." She constantly whines in class about the workload because she has soooo much on her plate, and complains about any thing that doesn't pass her standards (by which she means, anything that she doesn't understand easily). And nothing is ever her fault.

Her first exam grad was a 55. The most recent exam (the second of four) was a 58. The rest of the class seems to be getting it -- in fact, as I recently posted, the class average was one of the highest I've seen on this exam in about ten years of teaching. The class has really respodned to the challenge - they've not only stepped up their game, they seem to have realized that complaining to me about the workload is like trying to teach a pig how to sing (i.e. they expend effort, accomplish nothing, and both they and the pig (that's me) get annoyed). Except for Brittany the Princess - she's used to getting her way with whining and intimidation, so she keeps trying.

After she got her exam back, (it was handed back Monday - the drop deadline for the class), she came to my office wondering if she should stay or drop. She wanted assurances that if she was "close", I'd give her the minimum passing grade (since it's required, all she needs is a D-). Unfortunately, I couldn't give her any such assurances - I said that I often make the cutoff for the various grades somewhat lower than what's in the syllabus, but that's done on a case by case basis after looking at the overall class performance, and that whether or not she should stay in the class is a decision that only she could make. So far, there's nothing new to the story - pretty much standard stuff we've all seen many times.

Then the fun started.

BP goes out into the hall and starts sobbing and wailing. That's right, wailing. You could hear her almost on the other side of the building. Of course, I stay safely in my office - there's no way on God's Green Earth I'm going out to deal with that, because there are (like Bear Bryant said about passing the football) only a few things that can happen, and most of them are bad. Luckily, one of the female staff from one of our institutes came out and said "honey, why don't you go into that empty classroom so that you'll have some privacy" (read: "so that you won't be such a spectacle"). The staff worker said that she figured that the student in question was used to using the "cry out loud and maybe you'll get what you want" card. Shortly thereafter, several of her classmates (the ones who she hangs with) came in to my office and said "don't worry about Brittany, UP - she'll be fine. She does this to get attention and to see if she can get you to give her what she wants).

Unfortunately for my blood pressure, she decided not to drop the class.

Ah well - another day in academia. At least I'll have more Brittany stories to share as the semester progresses.

Wednesday, November 3, 2010

The Unknown Students Nail an Exam

I've been teaching the undergraduate core finance class this semester, . If you've been teaching for a while, you know that it's easy in that class to get discouraged by students who are (pick any or all that apply) unmotivated, unable to do simple math, whiny, unwilling to be stretched, never darken your office doorway, etc...

This semester, I made a conscious decision to really push my students - since the first week of September, they've two exams, three very involved problem sets (with a lot of curves thrown in - the typical one takes about 3-5 hours to complete), eight online quizzes, and short pop quizzes (they typically last 5 minutes or less and contain 1 or 2 basic questions on the material to be covered for the day's class) on average every other day, and almost constant cold-calling in class (in a 50 minute class, I typically call on 15-20 students). I like to think that I've set the bar at a far higher level than the other sections of the intro class being taught this semester. In fact, some of my students have told me that I've brought the class together - they're getting together in study groups of as many as 10 at a time (and there was supposedly a study group the night before the first exam of almost twenty students).

I've also made a decision to teach in full-blown crazy mode. Those who've heard my bloviations over the years know that I'm a flaming extrovert that tends toward (in my better moments) impressions of Ahnuld (I Am The Denominator!), Mister Rogers, Kermit The Frog, Inigo Montoya, and various characters from the Simpsons, South Park, and Monty Python, often in rapid succession. The last few years, the Unknown Son's illness had really taken a toll on my zest for teaching (and it showed in my evaluations). While he passed away almost 18 months ago, it's only been this semester that I've really felt like the "old" me. So, teaching has been a real pleasure.

Well, my class just had their second exam, and to put it bluntly, they did more damage to the exam than the Republicans did to the Democrats in the last election - they knocked it out of the park. There was the usual variation in grades, of course (one student got a 23 - It's never when your grade approximates your age), but on the whole they performed better than any comparable class I can remember going back to the late 1990's.

So, there is hope. It's nice to see that when you set the bar high (and meet the students more than halfway), they respond to the challenge.

Tuesday, November 2, 2010

Teaching Is Serious Business

I was asked, about four years ago, to write an essay on teaching. The following was my response. I believed this then. I believe it now. Joe


Teaching is serious business. We have wonderfully bright and talented students at every school. They have almost unlimited potential. For most, this is their one shot at college; they deserve nothing less than an excellent education,
an academic experience that challenges them to excel from their first day to their last.

Faculty members have a responsibility to the world to coax the very best from their students because they will certainly become the next generation of leaders. Where they go from here, what they accomplish, how they impact the world, depends in large part on how much we are able to push and nurture their development. I want every student to leave my class at the end of the semester saying, “I had to work very hard but I am so amazed by how much I learned.” Anything less is unacceptable.

If a teacher challenges students to think and do their best, word gets around campus quickly, but having a tough reputation is both good and bad. When students walk into my class on the first day, they tend to be very quiet and pay attention right away. On the other hand, I am always so disappointed when a student says to me “I hear you are a good teacher, but I didn’t take your class because I know you are very demanding.” Isn't that just incredibly sad? I think all of college education (as well as the world in general) will be better when students become convinced to sign up only for classes where teachers push them each day to do their best.

During each semester, I occasionally point out to my students that the grade of A, according to the University catalogue, reflects “outstanding” work. A student does not earn the grade of A for a good effort, only for consistently outstanding work. That’s a great goal; it inspires a wonderful level of effort. Grade inflation has hurt college education across this country and could be fixed simply by faculty members saying, “You earn an A when the work that I see is truly outstanding.” Don’t fool yourself; students are well aware of the difference between “good” and “outstanding.”

I use the Socratic Method. I call on every student every day in class. I don't ask them to regurgitate material; I ask them questions that I believe will cause them to think and reason—on the spot. That is what adult life is like. I then follow my initial question with others based on their answers. If I don’t get good replies from a student, I don’t just nod and smile; I demand better of them. A student once compared my class to a contact sport. Students should be ready, willing and able to discuss and debate issues. This is college, not high school.

I want a reasonable effort from my students because students get back based on what they put in. I expect them to study four to six hours each week outside of class so they’ll be ready to participate in class discussions. I use carrots and sticks. I say, “Good job!” when a student gives me a thoughtful, well-conceived answer, and I say, “Listen, you can do better than that!” when a student gives me a bad answer. I don’t view that as being disagreeable, although I do realize that it injects a bit of tension into the class. But this is not Sesame Street; a bad answer is a bad answer. There is only one primary goal in my class: to improve each student’s ability to think, reason and understand. Students realize how capable they are, but human nature loves to take the easy path.

A good basketball coach adapts to the talents of his or her players. A good teacher does the same. You cannot take an identical approach with every student. Some love to be pushed and pushed hard. They enjoy “in-your-face” challenges. Others are more fragile. You have to coax and nurture them. So toughness comes into my class where toughness is necessary. You teach each student, not each group. However, every student needs to be willing to prepare and to think. That is not negotiable.

One of the keys to becoming a good teacher is learning to walk into a room of students and “see” what is happening to the individual members: Billy needs a few extra seconds to formulate an answer, Susan loves to be called on, Andy doesn’t know what is happening right now, Ellen is not prepared. You have to be able to adapt to your students on the spot every day. What a wonderfully exciting job.

Our students can do amazing things, but if we don’t challenge them fully, they will never realize what marvelous talents they truly possess. Signing up for demanding classes might hurt a student’s GPA, but which is more important: developing a good mind or a good GPA?

Monday, November 1, 2010

Terry Pratchett Quotes

Before J.K. Rowland, Terry Pratchett was the best-selling British fantasy author of the 1990s. He's written more than 60 books (either by himself or in collaboration with a coauthor). In fact, while I was at the recent FMA conference I made a comment "There can only be... one thousand" at a reception,a and found that an Irish friend of mine was a fellow Pratchett-phile.

So imagine my enjoyment at finding out there's a repository of Pratchett quotes titled the Pratchett Quote File (you can also get it in a test file here). Here's one that struck home (note that the Unknown Wife and I just celebrated our 20th anniversary):
Sam Vimes could parallel process. Most husbands can. They learn to follow
their own line of thought while at the same time listening to what their
wives say. And the listening is important, because at any time they could
be challenged and must be ready to quote the last sentence in full. A vital
additional skill is being able to scan the dialogue for telltale phrases
such as "and they can deliver it tomorrow" or "so I've invited them for
dinner?" or "they can do it in blue, really quite cheaply."
-- (Terry Pratchett, The Fifth Elephant)
Unfortunately, skimming through the quote file just burned an hour and a half of my time. I guess I really don't want to start grading the 70 exams currently sitting on my desk (each of which has 10 pages of work in it). Unfortunately, I just gave the exam tonight, and I want to give them back on Wednesday (it's the drop date for the semester).