Category: Finance

An engaging history of ‘the Street’ warts and all

When seasoned financial journalist Eric J. Weiner sat down to write a history of Wall Street, he decided to let the larger-than-life characters do the talking for him. The result is a fascinating account of the events that have shaped American business, and America as a whole, for the past 146 years. In this remarkably revealing and surprisingly readable book, Weiner invites his readers into the exclusive clubs, tense boardrooms, and luxurious New York high-rises where billions have been made and lost, where a nation’s financial footing has been threatened and saved (more than once), and where Wall Street legends have risen and fallen.

Ballpark estimates: Strategies similar for sports bettors, investors

The sports betting world may seem like an unlikely laboratory to test theories of investment-strategy psychology, but a team of finance scholars has done just that. In fact, the researchers say, the market for investments and the market for sports wagering are similar in several important ways, including the role of information, expert opinion, sentiment and middlemen in each. The researchers used data from the sports betting market to test a key investment-psychology theory, and discovered that in the real world, sports bettors did not behave the way the theory predicted they would.

Institutional investors making big splash in hedge fund pool

Long considered an elite investment for high net-worth individuals, smaller private banks and certain institutional investors, the hedge fund market has grown up from a multimillion-dollar cottage industry into one where assets total more than $1 trillion. And the bulk of the growth in the past five years has been attributable to the entrance of institutional investors. Experts say the flood of capital has caused overcapacity in some hedge fund strategies, which, in turn, has caused deteriorating market conditions. Overall, pension fund managers are not at risk when investments are made in hedge funds or other alternative investments, says Herbert Kauffman, finance professor at the W. P. Carey School of Business. "But," he adds, "they are more at risk than they were when they didn’t risk any of it in these alternative investments. To the extent alternative investment allocations keep expanding, however, there may come a time when increased alternative investment allocations can become very worrisome."

Wishing upon a star won’t ensure a mutual fund’s astral performance

The allure of a star is nearly irresistible, and mutual fund investors are not immune. Investors are drawn to mutual fund families that boast a stellar performer, and the less luminous funds in the family benefit from a spillover effect resulting from their proximity to the headliner. This benefits fund managers, who are compensated based on assets under management, but the presence of a star in the portfolio does not necessarily mean that all of the funds in the family will do well for investors. Research by a W. P. Carey School of Business finance professor concludes that an investing strategy that consists simply of hitching onto stars is naive.

Tax amnesties: Revenue drivers or duds?

Tax amnesties, which have been offered in 35 states and the District of Columbia since the 1980s, are enjoying a wave of popularity. Data from the Federation of Tax Administrators show that since 2000, states have offered 35 tax amnesty programs. Under these programs, errant taxpayers face no penalty, no prosecution and, sometimes, no interest on delinquent taxes they pay. The state, on the other hand, gets its money and, possibly, some new taxpayers on the rolls. This may sound like a winning proposition for all, but some researchers at the W. P. Carey School of Business question the value versus the cost. Tax amnesty programs don’t come without a price tag, they say — and the downside of these deals actually may outweigh the minimal new revenue that amnesties usually bring in.

Winter of discontent: Will fuel prices, war worries affect holiday retail sales?

Internet retailers and big-box stores are bracing for the seasonal shopping boom. Consumers are finding a dizzying array of choices among ever-increasing promotional hype and ever-lengthening holiday retail season. But this year, retailers have a challenge to meet: The holiday spirits of many consumers are dampened by spiraling energy prices, economic uncertainty, a storm-battered homeland and the war in Iraq. An economist at the W. P. Carey School says heating prices may have the greatest effect on consumer spending. "If the winter is mild, the impact will be mild. If the winter is normal, the impact will be noticeable but survivable. If the winter is cold, the impact on retailers — particularly in colder parts of the country — could be really significant."