Seminar in Brazil

Tomorrow I'll present a fresh paper, joint with Murillo Campello (Cornell) at PUC-RJ. It's so new that the paper hasn't even been uploaded to SSRN yet!

Anyway, here are the details and short (and very tentative) abstract:

Corporate Cash Holdings and the Market for Equity Lending

• Local: Sala F200
• Data: 16/12/2014
• Horário: 17:00 hrs

The precipitous growth of institutional ownership has changed the makeup of corporate equity ownership and trading activity. Institutions are the also the largest lenders in the equity lending market. Using quasi-experimental methods within a precautionary savings framework, we show that companies save more cash and repurchase more stocks when more stocks are available for shorting.A one-interquartile range (IQR) increase in lendable supply is associated with a 1.3% increase in cash holdings in the subsequent quarter, equivalent to 5.9% of the IQR variation observed for cash holding.

Last presidential debate (in Portuguese)

Acabo de assistir ao debate. Realmente foi a melhor performance do Aécio e a pior da Dilma. No púlpito ela demosntrava seu total desconforto em estar ali. Em termos de confiança e calma parece que o Aécio era o presidente e ela a que estava correndo atrás.

Pena que a esquerdas não tenham um candidato com o dom da fala e do raciocínio para que o debate sobre o futuro do país fosse mais racional e inteligente. A Dilma claramente não quer fazer campanha e tem aquela cara de asco ao ser contrariada.

Assim como no começo ela só falava "Mais Médicos" e "no que se refere" agora ela só fala de "Pronatec" e "estarrecida". Parece que faz aula com o marketeiro e foca na palavra da semana que, então, passa a usar 400 vezes por hora.

Além das mentiradas (e confusões mentais) de sempre sobre economia, funcionamento do Congresso e vida da poupulação real, ficou claro a falta de propostas para o futuro e a humildade em reconhecer os problemas atuais para que mudanças sejam feitas. Realmente o pior momento foi dizer pra senhora economista fazer um curso técnico no SENAI. Lamentável.

Como as intenções de voto estão muito próximas, conquistar os poucos indecisos pode fazer a diferença no final. Nisso acho que o Áecio deu um banho e creio que arrebatou mais que a Dilma.

Espero que a escolha final sejapelo Aécio.

The life of PhD in pictures

Interesting visualization of a what doing a PhD looks like:

http://matt.might.net/articles/phd-school-in-pictures/ 

A Call to Economic Rationality in Brazil

In a couple of weeks Brazilians will go to the polls in the last round of voting in the presidential elections.

Two academic colleagues have written an economic manisfesto trying to deconstruct some of the fallacious arguments being used by the government during the campaign. It has been subscribed by many academic including myself.

The opposition hasn't been this close to winning an election since 1998. Let's hope they do for the sake of the country.

You can read it here (it's in Portuguese) and also the list of academics that have undersigned it:
https://sites.google.com/site/manifestoeconomistas/

Surely that will improve teaching ratings!

The FT reports that the UK government will start a randomized trial to see whether starting the school day later would improve teenagers' performance. 

I'd wish I could have been part of such a trial when I was younger. Starting school at 7:10am (off-topic: never understood the :10 start) in Brazi wasn't nice. It made me have to wake-up at 6am.

Randomized trials such as this one are a great way to test the impact of the effects of proposed policy before they are rolled out to the rest of the country. Just like the idea behind testing the effectiveness of new medicines, here they randomize schools that will get the treatment (i.e. that will start the school-day earlier) and compare it to those with similar characteristics that will carry on as before (i.e. the control group).

Here are a couple of interesting links with more on randomized trials:

http://www.economist.com/blogs/freeexchange/2013/12/randomised-control-trials

http://blogs.worldbank.org/africacan/can-randomized-control-trials-reduce-poverty

Transparency vs Market Impact: Oil Market Example

The FT has a story today about a event that I'm sure will become an academic paper in no time.

Mexico has been hedging their oil risk for quite a few years now. Basically they buy put options for a huge number of barrels, granting them the right to sell oil at a certain price at maturity (the story says they have set on $80/ barrel). Since PEMEX produces loads of barrels they are naturally hedged and guarantee their sale price per barrel in the future.

While spot and futures oil markets are large and deep, options this big are not that liquid. This is why most of the times these options are written over-the-counter with an investment bank counterparytuy.

This is an interesting example of the transparency vs market impact debate but incomplete. Maybe I'm missing something but I think they are making too much about it. The data is released with an obvious delay and the options are traded over-the-counter, so no big market impact. Maybe if the investment banks hedge their exposure by buying call options they could move markets, but they could also enter into OTC contracts themselves with other banks or use futures to pass the risk along.

Anyway, this would make a nice case study for a derivatives course.

Academic-kids problems

Should I feel bad for preferring to attend a Marketing seminar rather than a Corporate Finance happening at the same time?

Seems to be an interesting seminar to attend:

THE SMALL BIG, how small changes can make a big difference to your influence

Robert Cialdini, Arizona State University

2.30pm, Friday 19th September, Castle Teaching Room

Whatever your role in life much of your success is dependent on your ability to effectively influence and persuade others. But how? In his first ever visit to the University of Cambridge world renowned and eminently respected persuasion researcher Dr. Robert Cialdini will explore some of the fundamental principles of the influence process, including insights from his latest book THE SMALL BIG, co-authored with long time collaborators Steve Martin and Noah Goldstein.

Brazil, Education and Inequality

This Sunday I gave a small interview to Rio's largest newspaper about Brazil and the crucial role that proper investment on education will play in reducing inequality and long-term grown prospects.

It is in Portuguese though. Sorry to my 6 English-only readers!

Academia vs Practice

I am at a practititioner oriented conference and a couple things spring to mind.

I) Practitioners oftn have no idea what academic life in a Finance B-school looks like. They have no idea about the tenure system and that research is key to sucess.

II) people have to be aware that if you are given 15mins to present, it is impossible to go over more than 10-12slides. People usually bring too much and run over time.

Corffee breaks are usually very useful to test new ideas to see i they make sense in the real world and for potntial sources of new data.

Looking forward to going back home!

Should I Even Care?

Today the FT has a long article on the infamous Jérôme Kerviel, who made Soc Gen lose 4.9bi euros in 2008 due to cheating / forgery of trades.

Reading the article I felt that the journalist (or Jerome) was trying to blame the "system" for what he did.

 Jerome says "Think about my position. You have been condemned to pay €4.9bn, you have jail, you have the justice system against you. You have no life, few friends, no prospects. It’s difficult to rebuild any kind of real life with all that hanging over you,..."
Well, maybe you should have thought about that BEFORE doing you what you did.

I feel no pity for those involved in this case. The trader cheated hoping to make big bonuses, while his bosses probably knew and covered him up while things were working well.

Luck or Skill?

Harvard has just signed up Sir Alex Ferguson to teach on their ExecEd programs:

http://on.ft.com/1q0fjmw

That reminded me of the eternal luck vs. skill debate in asset management... Although my dislike for Man Unt, probably biases my opinion!

Don't Cry for my Argentina

I usually joke to students that Brazilians are more creative than Argentinians. While in Brazil we are always inventing new ways to mess with our economy, in Argentina they always make the same mistakes over and over again.

This WSJ article has a quote that summarizes it all: ""Our cycles are almost biblical," 

It is such a shame to see a country that has a well educated work force and decent infrastructure to keep suffering from the same type of mismanagement over and over again. Let 's see how long it will take for the bust to come this time.