N EWS F ROM T H E F I N AN C I A L E CONOM I C S I N S T I T U T E AT C L A R EMONT MCK ENNA CO L L E G E

In This Issue:PG 2: Director’s Report Continued; FEI Summer RAs & 2016-2017BMGI/Larson Fellows

PG 3-4: 2016 NYC Networking Trip

PG 5: CMC’s Student Investment Fund

PG 6-7: Spring 2016 Student ResearchAnalysts

PG 8: FEI Affiliated Faculty Publications

PG 9-10: Spring 2016 FES Presentations

PG 11: Where Will FEI Students BeWorking?

TheExchangeTheExchange

THE 2015-16academic year wassuccessful for the FEIin terms of ongoingprogramming, butalso featured two keydevelopmentsregarding ourgovernance structure.These are, first, the

establishment of a new group of alumni, theFEI Associates, with joint duties to provideoversight and advice to the StudentInvestment Fund (SIF) and ideas and supportfor FEI programming. Second, the FEIBoard of Advisors has been re-established asa separate entity from the previous RobertDay School Board of Advisors. We believeboth of these developments have greatpromise for the future success and growth ofthe FEI.

In the past few Director’s Reports, Ihave noted the increasing integrationbetween the FEI and the SIF, as we workclosely with SIF leadership on issues such asdatabase acquisition (note our purchase ofCapIQ discussed in the Fall Newsletter),sponsorship of SIF community serviceactivities such as the Financial LiteracyWorkshops during Fall ’15, and eventplanning such as the Claremont FinanceConference. Concurrently, over the courseof the past year, we have developed a newstructure incorporating young alumni into a group named the FEI Associates, withresponsibilities both to the SIF and to the FEI.

The FEI Associates is slated to meettwice annually, once each semester. At themeetings, a portion of the agenda will beoversight of the SIF. SIF teams will makepitches to the Associates, and Associates willprovide advice regarding formulation ofinvestment policy. Individual Associates willalso give input to SIF pitch teams during theprocess of preparing pitches. We expect thisdual mentoring/advisory role will be greatlybeneficial to the SIF. With regard to the FEI,Associates are expected to provide usefulinput on moving FEI programming forwardto keep pace with market place changes, andto communicate this to CMC students viainformation sessions.

The first meeting of this group occurredin February, and was a great success. The

VOLUME 21, SPRING 2016

Director’s Reportby Joshua Rosett

See Director’s Report on page 2

Joshua Rosett

CMC PRESIDENTHiram E. Chodosh

RDS BOARD OF ADVISORSPeter K. Barker ’70 P’01 (Co-Chair)

JP Morgan Chase & Co. (Retired)

James B. McElwee ’74 P’12 (Co-Chair)Independent Venture Capitalist

Gary Birkenbeuel ’80 Ernst & Young

Baxter Brinkmann P’16 The Brinkmann Corporation

Jose Campos ’91 Deloitte & Touche LLP

Heidi Nelson Cruz ’94 Goldman Sachs & Co.

Nicholas P. Daifotis ’79 P’17 RBC Capital Markets, LLC (Retired)

Alan M. Delsman ’68 Deutsche Bank AG

Christopher Dodds P’13 P’15 The Carlyle Group

Maureen Downey ’93 Pantheon Ventures

Russell Greenberg ’79 P’18Altus Capital Partners

Christopher D. Harris ’98 Damitz, Brooks, Nightingale, Turner, and Morrisset

Alan C. Heuberger ’96 BMGI

Stella Ho ’97 Moelis & Company

Andrew J. Kaiser P’13 Goldman Sachs Bank USA

Christine Huk Mann ’87 Goldman Sachs & Co.

I. Joseph M. Massoud ’89 Anholt Services (USA) Inc.

Susan Matteson-King ’85 P’18 Allianz Global Investors

Therese Mrozek P’15 Weston Presidio

Thomas B. Neff ’76 FibroGen, Inc.

John R. Shrewsberry ’87 Wells Fargo & Company

Robert P. Thomas ’99 The George Kaiser Family Foundation

Julius Wang P’14 P’15Samena Asia Managers

FEI DIRECTORJoshua Rosett

ADMINISTRATORBrian Dennis

ASSISTANT TO THE DIRECTORTerri Van Eaton

The Financial Economics Institute fosters education and research in financial economics byoffering a unique undergraduate curricular program, the Financial Economics Sequence,supporting state-of-the-art databases, and encouraging student-faculty interaction on research.

2 THE F INANCIAL ECONOMICS INST ITUTE

group had a very fruitful discussion of itscharges, provided useful input to the SIF andFEI, and proposed the concept of providingguidance to individual SIF pitch teams. Weare grateful for the time, energy, andenthusiasm evident from the very start of thenew FEI Associates activities.

The second key development is the re-establishment of the FEI Board of Advisors.A few years back, under circumstancesdifferent from what we face today, it wassensible to combine the advisory boards ofthe Robert Day School and FEI. Thoughthis merger proved successful for thedevelopment of each entity at the time,structural changes in the Robert DayScholars program over the past few yearscreated a situation where it is more efficientand beneficial to separate governancestructures for the FEI and the Robert DayScholars programs. Consequently, startingwith our next meeting in the Fall, the FEIBoard of Advisors will resume activities as aseparate entity. I am personally very gratefulfor all the input and oversight the boardmembers have provided over my first twoyears as Director, and eagerly look forwardto working with them in this new capacitystarting in the Fall. From the FEI point ofview, having their undivided attention on the

FEI agenda will provide great benefits.Though the news regarding the FEI

Associates and Board of Advisors is thehighlight of the past few months, we alsohave had a successful year with ongoingprogramming. We employed 20 studentseach semester during the 2015-2016academic year, and hired 7 full-time RAs lastsummer and have just brought on 6 full-timeRAs for this summer; we once again co-sponsored and participated in the New YorkCity Networking Trip, and helped organizeand sponsor a pitch event for the CMCStudent Investment Fund and two financeconferences, sponsored the SIF FinancialLiteracy Workshops last Fall; we added S&PCapital IQ to our data offerings, andcontinued to support students by providingtutors for the Bloomberg Terminal andCapIQ, as well as Excel, Python, and Stata;we participated in the Research Institute Fairin the Fall and the Inside CMC days(admitted students revisit days) this Spring.During the year, we made substantialprogress on our local content initiativeregarding SoCal stock indices andtransactions measures. We expect these toappear on our website shortly.

During this past academic year, 11students successfully completed the FinancialEconomics Sequence. We also proudly notethat every senior honors winner in Finance,Economics, and Economics Accounting for

the Class of 2016 has an association with theFEI or used FEI resources. The overall BestSenior in Economics, Brian Eckhardt, is atwo-year BMGI/Michael Larson AssetManagement Fellowship recipient. The BestThesis in Economics was written by RachelDoehr, both a BMGI/Michael Larson AssetManagement Fellow and FEI Stata Tutorthis year. The winner of both OutstandingSenior and Best Thesis in Economics-Accounting awards was Meghan Fuelling,who worked as a research analyst at the FEI.The winner for Best Thesis in FinancialEconomics, Robert Owlett, extensively usedresources provided by the FEI in his thesis.It’s also worth noting that one of the fourjuniors who received Best Junior inEconomics awards was Zhongyi “Joey” Yuwho has been an FEI research analyst.

Looking to next year, we anticipatecontinued integrated work with the SIF bothdirectly with SIF leadership and via the FEIAssociates, and look forward to working withthe re-established Board of Advisors.

Finally, as always, I am truly grateful forthe tremendous work of both Terri VanEaton and Brian Dennis for making the FEIan outstanding resource for our students. Ialso thank Colleen Bartlett in thedevelopment office for her tireless efforts andexcellent ideas on behalf of the FEI over thepast year. ▲

Director’s Report from page 1

Congratulations to the FEI Summer 2016 Research Analysts:

SYED UMAR FAROOQ ’17, Economics/International Relations dual majorZIJIN (LYDIA) FU ’18, Economics majorYUTAO (JAMES) JIANG ’18, Economics majorANDREW LINDQUIST ’19, Economics majorCHUYI (WENDY) SHENG ’17, Economics/Government dual major with the Financial Economics SequenceYULANG (DANNY) WANG ’18, Computer Science/Economics dual major

Congratulations to the 2016-2017 BMGI/Michael Larson Asset Management Fellows:

MATTHIEU HAFEMEISTER ’17, Economics/Mathematics dual major with the Financial Economics SequenceKAITLYN KELLEHER ’17, Economics/Government dual majorKATHERINE KREY ’17, Economics/International Relations dual majorHUNTER OLSEN ’18, Economics majorYULANG (DANNY) WANG ’18, Computer Science/Economics dual majorALBERT XU ’17, Economics/Philosophy dual major

CLAREMONT MCKENNA COLLEGE 3

2016 New York City Networking TripBy Matthieu Hafemeister ’17 and Rish Chitre ’18

THIS JANUARY, THE FINANCIALEconomics Institute and the Robert DayScholars Program sponsored the 13th annualNew York City Networking Trip. In the finalweek of winter break, three juniors andsixteen sophomores traveled to NYC to learnabout the various opportunities available inthe financial services industry. The tripoffered chances for students to connect withvarious alumni in both professional andcasual settings. Marisa Walter, InterimDirector of External Relations for the RobertDay School of Economics and Finance,Professor Joshua Rosett, Director of theFinancial Economics Institute, and EricHughson, Chair of the Robert Day School faculty, accompanied the students on their visit.

The trip started on the morning ofMonday, January 11th with a tour of theNew York Federal Reserve. Katie Femia ’06,a Markets and Policy Associate, hosted thegroup. In addition to Katie, ChelseaWunderlich, Intern Recruiter, joined us.Katie spoke to the group about her dutieswith regard to analyzing global financialmarket developments on behalf of theFederal Open Market Committee. Studentsalso received a tour of the Fed’s uniquearchitecture and were shown the gold vaultfar below the actual Federal Reserve.

The trip to the New York Federal

Reserve was followed by a visit to EndeavorGlobal, a nonprofit organization that aims toassist entrepreneurs by providing them withglobal services such as a large network forfunding and global mentorship. Endeavorwas also the recipient of the 2015 KravisLeadership Prize. The group met with MarkTrapani, an Associate within theEntrepreneur Selection & Growth Divisionat Endeavor. Mark spoke about theupcoming challenges to entrepreneurs as wellas a new division of Endeavor calledEndeavor Catalyst, an innovative co-investment vehicle designed to supportEndeavor Entrepreneurs.

The group then traversed down theAvenue of the Americas to visit BBVA, aSpain-based multinational bank. The groupmet with Carmen Lundell ’13, an Analyst inthe Domestic Debt Capital Markets Divisionof the bank. Carmen was joined by RichardCascais from the LATAM Credit SalesDivision and Alejandro Cuadrado, GlobalHead of Foreign Exchange. Carmen spokeabout her role within Debt Capital Marketsand her transition from the rotationalprogram at BBVA where she previouslyworked. Richard spoke about the globalclimate in Latin America and the challengesfacing sub investment grade companies. Allthree individuals spoke to the positive impactof BBVA’s expansion into the United States.

The evening offered some students thetime to explore the city while other studentsattended a “Dine-Around” opportunity withCMC alumni in the New York City area. Pairsof students ventured out into the city to meetthe alumni at a predetermined restaurant. Thediscussions were both casual and professionalas students met with alumni of different agesand sectors of the financial services.

The next morning started off bright andearly with a visit to Morgan Stanley in theirTimes Square office. The group was hostedby Phil Crawford, a recent 2015 graduate andBen Kraus ’11. Both work in the Sales andTrading Department of the investment bank.This visit stood out to students because theywere exposed to a different division otherthan the traditional Investment BankingDivision. The fast-paced nature of the joband stories of large quantities of money beingexchanged gave students ideas for potentialcareer opportunities. Ben and Phil also spoketo the client-side of the business and some oftheir day-to-day operational tasks. Finally,Ben and Phil gave the students an outlookand opinion on the happenings of the volatilefinancial markets and how that affects theSales and Trading business.

The group switched gears for the nextvisit to Sibson Consulting, a strategic humanresources consulting firm. Students weregiven a presentation by Senior Associate IlanBielas ’13, and Associates Hunter Salem, SamFassak and Megan Werner. The topic ofconversation revolved around variousprojects the individuals within the grouphave worked on and the impact thoseprojects have had on the company. Many ofthe projects focused on maximizing theproductivity of the clients’ human capital.

The afternoon started off with a visit toDeutsche Bank. The students began byhaving lunch in the office and socializingwith Alan Delsman ’68 a Senior CreditExecutive; Tony Conklin, a ManagingDirector in Equity Research; StevenLimandibhratha ’14, Risk Analyst; ZainJamal ’10, Risk Analyst, specializing in realestate; Catherine Madigan, a ManagingDirector of the Leveraged Finance and RiskDivision; Taylor Pulling, an Analyst in theLeveraged Finance and Risk Division; Mimi

See NYC Networking Trip on page 4

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Rogers, Analyst; and Nicolle Bugajsk, theGraduate Recruiter. The hosts delivered afirm-wide overview and presented variousopportunities for young professionals withinthe bank. Next, there was a panel discussionon opportunities along with descriptions ofwhat is involved in working in risk and equityresearch at a large global investment bank. Astrong emphasis was placed on the advantagesof working at a truly multinational corporationthat values working abroad. The analysts andMr. Delsman spoke of the opportunities towork in Germany given the bank’s origin.

After visiting the iconic Wall StreetBull statue, the group made their way tothe World Trade Center 9/11 Memorialand then on to visit Goldman Sachs. There,we were joined by a wide array of people inthe investment bank. Andrew Cosentino’11, an Associate in the Investment BankingDivision; Andrew Duckworth ’12, anAssociate in the Securities Division; JohnWillian P’17, a Head of Securities, Futuresand Clearing; Ben Colman ’03, an Associatein the Technology Division; ChristineMann ’87, a Vice President/Private WealthAdvisor in the Private Wealth ManagementDivision; David Alvillar ’01, a Director inthe Sales and Trading Division; AndrewKaiser P’13, a Managing Director ofPrivate Banking; and Peter Rominger PIT’14, an Analyst in the Asset ManagementDivision of the bank, gave the group an in-depth overview of the bank and thedifferent operations that are part ofGoldman Sachs.

Tuesday concluded with an alumnireception hosted by Doug Peterson ’80P’14,’15, President and CEO of McGrawHill Financial. The event was attended byvarious alumni from the New York Cityarea and also a few from other locationsincluding Chicago and San Francisco.

The third day started with a visit toAtalaya Capital. Ivan Zinn ’96, founder,hosted the group and was joined by BenSpector, part of the Operations Team, andMia Genereux, an Analyst. Mr. Zinnhanded out copies of an overview of thecompany and talked about the business ofbuying distressed debt and assets andturning them around by assessing the truevalue of the asset or security. He also hadMia talk about her role as a recent recruit,the interviewing process with examples of

interview questions she was asked, and thework she does on a daily basis.

The group then ventured over to MillerBuckfire, a restructuring firm which is part ofStifel. The group was given a fantasticpresentation by John McKenna ’89 and wasjoined by May Reilly, a Scripps Collegegraduate. Mr. McKenna gave a presentationabout restructuring and the challenges, bothprofessionally and personally, that someoneworking in restructuring faces. Mr. McKennaimparted valuable advice to the group andurged us to think about restructuring as anopportunity for those who enjoy learningabout intricate technical skills.

After Miller Buckfire, the team visitedthe JP Morgan office and was joined byMerriel Foster ’14, an Analyst in the AssetManagement Division of the bank; SusanAdamsen ’81, a Managing Director of PrivateBanking; Investment Banking AnalystsAndrew Nam ’15 and Daniel Anderson; andNickolas Polowchena, a VP and the AnalystManager. The panel of individuals gave thegroup a good sense of what a career inbanking and asset management implied forpeople who are just out of college, but alsowhat staying with a big firm can look like 20or 30 years down the line. Analysts spoke oftheir daily duties and recent deals theyworked on, while Susan spoke about herinteraction with clients and her role indeveloping professional relationships.

The day concluded with a visit to KKR,a prominent private equity firm founded byCMC alumni Henry Kravis ’67 and GeorgeRoberts ’66, along with Jerome Kohlberg.The students were introduced to a panel ofanalysts and associates within a variety ofgroups at KKR. Rodrigo Bravo ’13, Lin Hi,Andrew Bergman ’14, Brandon Brier, NavenJohal, Jane Cai, and John Lu all spoke to usabout the various groups at KKR including aKKR-specific group called the InternalCapital Markets Group. The panel alsospoke about the recent shift in KKR’srecruiting process to include recent college undergraduates as well as recentgraduate students.

That evening, more “Dine Around”opportunities were scheduled for some of the students.

Thursday, January 14th was the last dayof visits, which included a total of fivedifferent visits. The first was PA Consulting,a management consulting firm specializing intechnology and innovation. We were hostedby Clark Kissiah ’13, in the Energy &

Utilities sector; Michael Zhan, Energy &Utilities; Justin Hughes, Federal & Defense;and Ashley Amaral in the Healthcare sector.The team talked about their roles indeveloping technology for clients’ businessesas well as fulfilling consulting duties tomaximize efficiency and impact.

After PA Consulting, the group madetheir way to Wells Fargo where they weregreeted with a presentation by a panel ofInvestment Banking Analysts. The group wasalso given the unique opportunity to hearfrom John Weiss, the President of WellsFargo Securities. A large portion of thediscussion from the panel and Mr. Weissfocused on the culture of Wells Fargo as abank, as well as the ongoing transition of thebank as it becomes one of the fastest growinginvestment banks on the street. The analystsspoke about their experiences working in a collaborative environment while at Wells Fargo.

Next up was a stop at Fred Alger AssetManagement. Kevin Collins, Client PortfolioManager, and Dan Chung, CEO/CIO,hosted the group. Mr. Collins gave the groupan overview of the firm’s overarching goalsand strategies that focused on growthinvesting. Dan Chung spoke to the groupabout the firm’s history and the roles andresponsibilities that he has acquired as CEOand as a junior team member.

Following Fred Alger, the team visitedMillstein, a boutique restructuring bank. Thegroup was hosted by Associates MattSchneidemann and Noah Kaswell andAnalysts Samuel Breuer, Josh Mendelsohn,Quinn Lawlor, and Josh Chmara. The teamtalked about the nature of restructuring andhow it differs from conventional investmentbanking. They explained their various careerpaths and choices that led them to a career inthe restructuring world. In addition, thegroup talked about a few deals they workedon both in the public and private sectors.

Finally, the group ventured to Google inChelsea Park for the last visit of the trip. Wewere hosted by Tina Daniels ’93, a Directorof Agency Business Development; JackieRosen in the Agency Business DevelopmentDivision; and Thomas Graham who workson the Data Analytics, Agency BusinessDevelopment Team. Tina and Jackie spokeabout their careers and how they ended up intheir current positions. They also gave the

NYC Networking Trip from page 3

See NYC Networking Trip on page 11

CLAREMONT MCKENNA COLLEGE 5

THIS ACADEMIC YEAR HAS BEEN Atransformative period for the ClaremontMcKenna College Student Investment Fund(SIF). Over the preceding months, the SIFhas established a new oversight structure inassociation with the Financial EconomicsInstitute (FEI), refined its operationalstructure, developed new resources tosupport best practices with our investing,and hosted the Claremont FinanceConference. The year also marked successin our long-running campaign to reach $1million in assets under management. Takingon new initiatives is a hallmark of the SIF,and if the progressions made over the pastfour years serve as a guide, the next fouryears will be even more exciting.

In June of 2015, the SIF received a $1 million donation from George Roberts’66 P’93. We thank Mr. Roberts for thisextraordinary gift. The Fund now manages$1.65 million of the College’s endowment, asignificant step up from the $500investment portfolio at its founding. Theincrease in portfolio size was appropriatelyaccompanied by an increase inresponsibility, and accordingly the SIF hasspent the year improving its organizationalstructure and implementing investingsafeguards. The primary addition to theFund’s oversight was the creation of a newalumni group named the FEI Associates,with dual responsibilities to provideoversight for the Fund and input andsupport for FEI activities. The FEIAssociates includes CMC alumni who wereSIF members, FEI Research Analysts, orstudied finance while at CMC. Goingforward, the FEI Associates will be anadditional resource when students havequestions about proposed investmentpitches or the broader SIF portfolio.

While historically strong in securityanalysis and selection, the Fund has notalways maintained focus on managinginvestments after they enter the portfolio.This year, the Fund has placed greateremphasis on portfolio management. Overthe fall semester, we reviewed all of ourlegacy investments and sold many of the oldpositions. Going forward, the SIF plans tomanage a portfolio of ten investments, eachcomprising approximately $150,000 of the

portfolio. Structuring the portfolio aroundten investments will optimize students’abilities to track corporate developmentsand reevaluate holdings in a timely manner.

Similarly, to better manage the largerportfolio, this year the SIF substantiallyexpanded its student membership. The fallpool of SIF applicants was especially strong,so the Fund admitted a record number ofstudents in early October. Ten freshmen andfive sophomores entered the Fund, bringingthe total membership to 53 students. Thenew members have proven to be invaluablecontributors to the team as the Fund worksto monitor existing investments and deploycapital into new investments.

To provide continuity to the SIF, in thespring of 2015, we created a new databaseto archive all previous SIF pitches, valuationmodels and general educational resources.This database will be perpetually updated sothat future members have access to thecompendium of SIF work. The Fund alsorewrote its student constitution in order tobring its current operating structure in linewith its governing document. The primarychange in the new constitution was arevision to voting procedures. Historically,to add an investment to the portfolio a pitchneeded to be approved by a simple majorityof members, and all members had one equalvote. The new voting system maintains thesimple majority threshold, but weightsmembers’ votes based on their seniority inthe Fund. The votes made by seniors areweighted by a factor of 4, the votes made byjuniors are weighted by a factor of 3, thevotes made by sophomores are weighted bya factor of 2, and the votes made byfreshmen are not magnified by a factor. Thenew system is designed to account for theknowledge and experience students attain asthey advance in the Fund and at CMC, and improve our stock selection. Lastly, to standardize pitch content, the Fundimplemented a rubric of material to beincluded in every investment presentation.All of these improvements have aided ourportfolio management and security selection efforts.

In addition to exciting internaldevelopments in the SIF, the Fund has alsodevoted significant resources toward

programming for CMC and the fiveClaremont Colleges. Most recently, the SIFhosted the Claremont Finance Conferencewith support from the FEI and the RobertDay School of Economics and Finance. Theconference is an annual event that bringstogether some of the Claremont Colleges’most successful alumni in the financeindustry to speak with students aboutcurrent events.

The day began with a presentation bythe SIF leadership to the new FEIAssociates, in which students walked thealumni through the current SIF portfolioand solicited feedback on improvementareas. Following the formal presentation,there was a lunch in the Marian Miner CookAthenaeum with members of the FEIAssociates. After lunch, students heard fromDavid Brown ’99, Chair of the new FEIAssociates and founder of Hawk RidgeManagement, and Steve Burlingame ’99,Investment Analyst at Poplar Forest, aboutvalue, growth and hybrid investing. Theconference’s keynote speaker was JohnShrewsberry ’87, Executive Vice Presidentand Chief Financial Officer of Wells Fargo.After a late-afternoon networking receptionon the Athenaeum outdoor patio followedby a steak dinner, Mr. Shrewsberry led theaudience through a presentation aboutinnovation on Wall Street and the rise offinancial technology. The ClaremontFinance Conference had an excellentturnout and complemented our fall series onpersonal finance and money management.

Thanks to support from CMC, the FEIand the Robert Day School, the SIF has hada very successful year. This success extendsbeyond CMC, with the graduating class ofSIF seniors joining firms such as Alvarez &Marsal, Bank of America Merrill Lynch,The Boston Consulting Group, Deloitte,FTI Consulting, Goldman Sachs, Millstein,and Wells Fargo. Helping students achievepositive post-gradu ation outcomes is thecore mission of the SIF. The Fund’scontinued improvements to its structure andlearning experience will ensure that theseoutcomes persist for future generations ofSIF members. ▲

CMC’s Student Investment FundBy Brian Eckhardt ’16, SIF Chief Executive Officer (2015-2016)

GABRIEL AYALA ’16 was the tutor for Bloomberg and Capital IQ atthe FEI. He also worked with Professor Joshua Rosett on constructingregional stock indices including a Los Angeles index and InlandEmpire index.

AMBERISH CHITRE ’18 worked with Professor Joshua Rosett to buildcustom equity indices in Bloomberg to investigate whether theperformance of companies that are headquartered in a specific regionreflect economic growth within that region. Analysis was done byregion and sector within California.

RACHEL DOEHR ’16 was the Stata tutor at the FEI.

JACK GERSTENBERGER ’17 worked on a project with Professor EricHelland to research the difference in the SEC’s success rate when theybring a case to their own administrative judges versus when they mustfile the case in a criminal court of law.

MATTHIEU HAFEMEISTER ’17 worked with Professor Joshua Rosetton a project involving reporting and analyzing Mergers andAcquisitions located geographically in Southern California. Theproject analyzed trends in the various verticals and counties ofSouthern California to further break down the deal flow and activity.

AMY INGRAM ’17 worked with Professor Angela Vossmeyer on aproject investigating the stigma caused by rescue programs during thefinancial downturns and analyzing how it affects a bank’s ability tooperate as a financial intermediary using a novel data set from theReconstruction Finance Corporation in the Great Depression.

MICHAEL IRVINE ’16 worked with Professor Darren Filson to createa new way of analyzing and ranking economics journals, including byexamining median citations and time-based changes in citation counts.He was also the Python tutor.

ANANT JAITHA ’17 worked with Professor Ananda Ganguly on aproject which is developing a web application to conduct and recordthe results of an experiment on the effect of different kinds ofaccounting reports on investors’ belief formation and trading activity.

KANISHK KAPUR ’18 worked on two projects with Professor GeorgeBatta. The first one studied the effect of a subsidiary initiating CDStrading on a diversified firm’s internal capital market. The second oneexamined the effects of CPA licensing requirements on the quality ofborrowers’ information given to banks.

KAITLYN KELLEHER ’17 worked with Professor Eric Helland toresearch the difference in the SEC’s success rate when they bring acase to their own administrative judges versus when they must file thecase in a criminal court of law.

SHENGYUE “LISY” LI ’18 worked with Professor Angela Vossmeyeron a project investigating the stigma caused by rescue programsduring the financial downturns and analyzing how it affects a bank’s

ability to operate as a financial intermediary using a novel data setfrom the Reconstruction Finance Corporation in the GreatDepression.

MINGDA LIU ’17 worked with Professor Richard Burdekin on aproject researching the monetary and fiscal policymaking in SouthPacific countries by compiling and analyzing data using Stata andExcel. He also oversaw the content and the maintenance of the FEIwebsite.

SEAN SAKAGUCHI ’16 worked as the Excel tutor at the FEI,providing training on Excel and spreadsheet utilization, and heanswered students’ basic and more accelerated questions in the use ofthis program as they apply to school projects, personal interests, orprofessional projects.

ABIGAIL SCHANTZ ’18 worked on a project with Professor EricHelland to research the difference in the SEC’s success rate when theybring a case to their own administrative judges versus when they mustfile the case in a criminal court of law.

GEORGE VOJTA ’17 worked on a project with Professor Eric Hellandto research the difference in the SEC’s success rate when they bring acase to their own administrative judges verses when they must file thecase in a criminal court of law.

PETER WELCH ’18 worked on a project with Professor Eric Hellandto research the difference in the SEC’s success rate when they bring acase to their own administrative judges verses when they must file thecase in a criminal court of law.

ALBERT XU ’17 worked with Professor Sven Arndt on several projects,one of which is titled, “Economic Stability in a ContemporarySetting.”

ANDREW YEH ’17 worked with Professor Eric Hughson on a projectlooking at momentum as a factor cause of idiosyncratic equity returnsand examining its properties and return distribution.

ZHONGYI “JOEY” YU ’17 worked on two projects with Professor JeffFlory. The first one analyzed the key determinants of the micro-savings adoption rate in Malawi with a panel dataset of over 2,000households collected before and after the introduction of savingsservices. The second one was doing research on existing economicmodels to derive appropriate subsidy levels and solar panel financingschemes in rural Argentina.

YI “NORA” ZHANG ’17 worked with Professor Mitch Warachkaduring the first half of the semester on a project researching theeconomic cost of inattention. She then worked with Professor EricHelland on a study of the difference in the SEC’s success rate whenthey bring a case to their own administrative judges versus in acriminal court of law.

Financial Economics Institute Spring 2016 Student Research AnalystsDuring the Spring 2016 semester, twenty student Research Analysts were hired to work at the FEI. The following is a list ofstudents, their faculty advisors, and a brief description of the research projects in which they were involved or the type oftutoring they provided:

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FEI Affiliated Faculty Research Selected 2015-2016 publications by faculty members affiliated with the FEI:

u “Blood Money: Violence for Hire in the National HockeyLeague,” Richard C. K. Burdekin and Matthew GrindonMorton, International Journal of Sport Finance, Vol. 10, No. 4(November 2015), pp. 328-356

u “Evaluating Mergers in the Presence of Dynamic CompetitionUsing Impacts on Rivals,” Darren Filson, Saman Olfati, andFatos Radoniqi, Journal of Law and Economics, forthcoming

u “The Economic Consequences of Tax Service Provided Sanctions:Evidence from KPMG’s Deferred Prosecution Agreement,”Andrew Finley and James Stekelberg, Journal of AmericanTaxation Association, Spring 2016

u “Fantasy and Dread: The Demand for Information andConsumption Utility of the Future,” Ananda Ganguly andJoshua Tasoff, Management Science, forthcoming

u “Estimating Effects of English Rule on Litigation Outcomes,”Eric Helland and Jungmo Yoon, Review of Economics and Statistics, forthcoming

u “The Impact of Fetal Alcohol Exposure: Evidence from the Endof Prohibition,” Eric Helland, Mary Evans and Jon Klick,Economic Inquiry, 54(2): 762-777, 2016

u “Of IV and Institutions,” Eric Helland, Journal of Institutional andTheoretical Economics, March, 2016

u “Everything’s Bigger in Texas Except the Medmal Settlements,”Eric Helland, Tom Baker, and Jon Klick, Connecticut InsuranceLaw Journal, forthcoming

u “Stock Ownership and Patterns of Recusal in Federal Courts,”Eric Helland, James Anderson, and Merritt McAlister,Georgetown University Law Review, 103(5): 1165-1210, 2015

u “Seasonal Affective Disorder and Seasoned Art Auction Prices:New Evidence from Old Masters,” Doron Kliger, Joshua Rosett,Yaron Raviv, Thomas Bayer, and John Page, Journal of Behavioraland Experimental Economics, Vol 59: 74-84, December 2015

u “Are Public Equity Markets Still Relevant for EntrepreneurialFirms?” Joshua Rosett and Richard Smith, in EntrepreneurialFinance: Managerial and Policy Implications, Na Dai andDonald Siegel, Eds., World Scientific Publisher, 2016

u “Great Companies: Looking for Success Secrets in All the WrongPlaces,” Gary Smith and Gabrielle Baum, Journal of Investing,24(3), 2015, 61-72

u “A Fallacy That Will Not Die,” Gary Smith, Journal of Investing,25(1), 2016, 7-15

u “Hurricane Names: A Bunch of Hot Air?” Gary Smith, Weatherand Climate Extremes, forthcoming

u “Sunny Upside? The Relationship Between Sunshine and StockMarket Returns,” Gary Smith and Michael Zurhellen, Review ofEconomic Analysis, 7, 2015, 173-183

u “Companies are Seldom as Good or as Bad as They Seem at theTime,” Gary Smith, Essays in Honor of Joseph Stiglitz,Columbia University Press, forthcoming

u “Great Company, Great Investment Revisited,” Gary Smith,Journal of Wealth Management, forthcoming

u Standard Deviations: Flowed Assumptions, Tortured Data, andOther Ways to Lie with Statistics, Gary Smith, Chinese edition,in press

u What the Luck? The Surprising Role of Luck in Our EverydayLives, Gary Smith, New York: Overlook/Duckworth, 2016

u “The Supply Chain Spillover Effects of IPOs,” Janet KiholmSmith, K. Yamada, K. Kutsuna, and R. Smith, Journal of Bankingand Finance, forthcoming, 2016

u “Socially Responsible Investing by Universities and Colleges,”Janet Kiholm Smith and R. Smith, Financial Management,forthcoming, 2016

u “Risk-taking in Competitive Settings: Evidence from Match PlayGolf Tournaments,” Janet Kiholm Smith and S. Ozbeklik,Journal of Corporate Finance, forthcoming, 2016

u “Institutional Investors and the Transformation ofUnderperforming Firms,” Janet Kiholm Smith, G. Erenburg andR. Smith, Quarterly Journal of Finance, 5 (2015): 1550019

u “Sample Selection and Treatment Effect Estimation of Lender ofLast Resort Policies,” Angela Vossmeyer, Journal of Business andEconomic Statistics, 34, 197-212

u “Fixed Exchange Rates and Financial Markets as Sources ofMacroeconomic Disciplines,” Thomas Willett, Eric Chiu andStefanie Walter, in Thomas Oatley, Ed., Handbook of InternationalMonetary Relations, Edward Elgar, 2015, pp. 285-303

u “Chinese Stocks during 2000-2013: Bubbles and Busts orFundamentals?” Thomas Willett and Priscilla Liang, The ChineseEconomy, No. 3, 2015, pp. 199-214

u “Capital Flow Surges as Bubbles: Behavioral Finance andMcKinnon’s Over-borrowing Syndrome Extended,” ThomasWillett, Levan Efremidze, and John Rutledge, Singapore EconomicReview, forthcoming

u “How Common Are Capital Flow Surges? How They areMeasured Matters A Lot,” Thomas Willett and M. Crystalin, et.al., Open Economies Review, 2015, Vol. 26, pp 663-682

u “Preliminary Evidence for the Neurophysiologic Effects of OnlineCoupons: Changes in Oxytocin, Stress, and Mood,” Paul Zak, V.Alexander, and S. Tripp, Psychology & Marketing, 32(9): 977-986[Digital Version] 2015

See Faculty Research on page 9

CLAREMONT MCKENNA COLLEGE 9

Spring 2016 Financial Economics Sequence Oral Defense Presentations

THE FINANCIAL ECONOMICSSequence is part of the Robert Day School ofEconomics and Finance. The curriculum ofthe Sequence is designed for studentsinterested in pursuing careers in the financialsector and/or graduate education ineconomics, finance, and related fields.

The Sequence has a rigorousquantitative focus and is designed tocomplement majors in economics,economics-accounting, and mathematics, aswell as dual majors having an economicscomponent. In addition, the Sequence iscomplementary to the coursework requiredfor the undergraduate Robert Day ScholarsProgram, and prepares students for theMaster’s Program in Finance of the RobertDay School. Under the auspices of theFinancial Economics Institute (FEI), studentscomplete the Sequence, which is noted onthe transcript, thereby attesting to their solidunderstanding of the discipline.

We have eleven FES seniors who will begraduating during the 2015-2016 academicyear. Three of these seniors gave their FESoral defense presentations at the end of thefall semester and eight at the end of thespring semester. In order to receive theFinancial Economics Sequence notation ontheir transcript, students must complete amajor research project in the area of financialeconomics, the project may be the student’ssenior thesis, and make an oral presentation.

The following is a list of the studentswho made their presentations this semesteralong with the titles and the abstracts of their theses:

NAJEER AHMED, Addressing the Post-Keynesian Critique: Exchange RateDetermination with an Extended Mundell-Fleming Model

“The assertion that financial flows arethe primary drivers of exchange rates may beconsidered as financial markets becomeincreasingly large and sophisticated.However, the Post-Keynesian critique leaveslittle room for the real economy to impactexchange rates. This paper aims to extendthe Mundell-Fleming model to address thePost-Keynesian critique of mainstreammodels, by incorporating wealth effects,expectations, and Taylor-rule interesttargeting. Discussion of significant financialevents affecting the USDJPY exchange ratefinds that wealth effects are significantconsiderations, and that the real economycannot be discounted completely. Empiricalresults find that the real interest rate is asignificant factor in exchange ratedetermination, tying into the discussion over the relationship between savings and consumption.”

JUSTIN BECK, NAFTA’s Impact on Mexico,the U.S., and Canada’s Economies: A Look atStock Returns

“The North American Free TradeAgreement continues to be a controversialtopic, and with the impendingimplementation of the Trans-PacificPartnership trade agreement, NAFTA hasbeen a heavily discussed issue during the2016 presidential campaign. Past researchhas critically assessed the extent to which

NAFTA delivered on promises made by itslobbyists to improve economic welfare andstimulate growth in the North Americanmarkets, via trade and investment. Thesestudies explain that NAFTA has helped toboost intra-regional trade and investmentflows in North America, but has fallen shorton any substantial improvements in welfareand deeper regional economic integration.However, researchers have found evidencefor convergence among North Americanequity markets, and argue that this isgenerated by NAFTA. Using time series datafrom 1990 to 2007, this study builds on theseconclusions to examine how NAFTAimpacted equity markets in the NorthAmerican region. I look at returns to eachmajor stock index for Mexico, the U.S. andCanada, and find evidence that returns onthese indexes improve in the post-NAFTAperiod for Mexico and the U.S., but not forCanada. Additionally, there is evidence tosuggest that exports and FDI are the primarydrivers for this improvement in stock returns.”

EDUARDO RAMIREZ, Does Size and IndustryAffect CEO Performance? The Effect of CEOSuccession Announcements on Firm Value

“This study expands on previousresearch regarding the effect of CEOperformance on firm value. An event study isconducted using a market model of CEOsuccessions and daily returns in order togenerate predicted returns. Two separateregressions are run using a 3 day and 5 day

See FES Theses on page 10

u “The heart of the story: Peripheral physiology during narrativeexposure predicts charitable giving,” Paul Zak, J. A. Barraza, V.Alexander, L. E. Beavin, and E. T. Terris, Biological Psychology, 105: 138-143 [Digital Version] 2015

u “Oxytocin reduces food sharing in capuchin monkeys bymodulating social distance,” Paul Zak, S. F. Brosnan, C. F.Talbot, J. L. Essler, K. Leverett, T. Flemming, P. Dougall, and C.Heyler, Behaviour, 152(7-8): 941-961 [Digital Version] 2015

u “The Neuroscience of Brand Trust,” Paul Zak and L. A. Crosby,Marketing Management, May: 22-23 [Digital Version] 2015

u Oxytocin Responses After Dog and Cat Interactions Depend onPet Ownership and Affects Interpersonal Trust,” Paul Zak, B.

Curry, B. Donaldson, M. Vercoe, and M. Filippo, Human-AnimalInteraction Bulletin, in press

u “The Neural Inhibition of Learning Increases Asset MarketBubbles: Experimental Evidence,” Paul Zak, L. Efremidze, G.Sarraf, and K. Miotto, Journal of Behavioral Finance, in press

u “Persuasive narratives and costly actions,” Paul Zak, G.Zahedzadeh, and J. A. Barraza, Terrorism and Political Violence, in press

u “Building Trust is a Blood Sport,” Paul Zak, Ivey Business Journal,November/December, 2015

Faculty Research from page 8

10 THE F INANCIAL ECONOMICS INST ITUTE

event window respectively. The results of theregressions are using to compare abnormalreturns between industries and marketcapitalization. While some daily abnormalreturns are statistically significant, cross-sectional analysis of CAR are for the mostpart not significant. Further study is neededin order to come to a stronger conclusion.”

SHARAN SETH, The Effects of ManagerialTurnover on Share Prices of Publicly TradedEnglish Football Teams

“This paper explores the effects ofmanagerial changes on the share prices ofpublicly traded football teams in England.Using data from 9 publicly traded teamsduring 1992-2016, 21 managerial changeswere analyzed through an event study analysis.Events were categorized as sackings orresignations, and the hypotheses for each werelaid out differently. The results indicated thattwo of the managerial sackings generatednegative abnormal returns prior to the sackingand positive abnormal returns after the changeof manager. The study also identifies thedifficulties in the study of football teams’ shareprices due to their illiquidity and identifiesimprovements that can make further researchin this topic more accurate.”

ANDREW SOVA, The Effect of NegativeSpecial Items on Future Income in Different Sectors

“With increasing scrutiny over standardsof financial statement transparency, thispaper attempts to resolve misconceptionsabout effects of negative special items onfuture earnings. Value investor BenjaminGraham advises students to avoid firms thatconsistently post special items, because it isindicative of the volatility of the business.Using panel data from 2003 to 2014 and aregression structure used by Burghstaler etal. (2002), I find in contrast to Graham’swarning, that negative special itemssignificantly increase earnings in the fourquarters following its occurrence.Furthermore, I analyze results by sector andfind that negative special items in theInformation Technology sector have themost dramatic positive effects on futureearnings. This study gives investors moreinsight as to what negative special itemsmean for future earnings of a company.”

ZHENGYANG XU, Contagion and CompetitiveIntra-Industry Effects of Default Announcements– Evidence from Chinese Bond Market

“In this paper I analyzed the intra-industry competitive and contagion effectduring bond defaults in China. The analysisis performed using bond price, since theChinese stock market is immature and hasincredible amount of volatility. The sampleincludes 15 cases of default across 10different industries since 2014, and thecumulative effect of the industry portfoliosis positive over 11-day event window(competitive effect) with a t-statistic of 6.22.In addition, I found that SOE defaultsoverall have a significant positive abnormalreturn on their industry portfolios during11-day event window with a t-statistic of4.72, indicating a competitive effect. Incontrast, Non-SOE defaults overall have asignificant negative abnormal return ontheir industry portfolios over 3-day windowwith a t-statistic of -3.36, showing acontagion effect. But this difference couldbe due to the characteristics of industries asopposed to the nature of SOEs. Byanalyzing the condition and characteristicsof each industry, I found that thesignificance of abnormal return depends onthe level of competition of the industry andthe level of information available. In termsof contagion and competitive effect,industries showing a contagion effect offerproducts that are difficult to differentiate,such as cement and water bottle. Industriesshowing a competitive effect offer productsthat are highly specialized and rely heavilyon technology innovation, such as thespecial equipment industry and electricequipment industry.”

XINYING YOW, Measuring the Effectivenessof China’s Capital Flow Management andProgress on Capital Account Liberalization

“China’s goal of eventually having therenminbi (RMB) be ‘fully convertible’necessarily requires that its capital account befully liberated; this paper investigates the on-going changes of the implemented capitalcontrols by China and China’s progress onliberalizing the country’s capital account. Thefirst portion of the paper studies deviations ofthe covered interest parity, a commonmeasure of capital controls. Econometricalanalysis provides evidence for significant andpersistent RMB/USD interest ratedifferentials, calculated from monthly data of

1-month yields for the sample period of 1999to 2014. At the same time, evidence forcointegration between the onshore andoffshore yield suggests that capital flows arenot fully restrictive in the long run. Thesecond portion of the paper analyzesconstructed de jure capital control indicesbased on IMF’s AREAER documentsfollowing Chen and Qian (2015), and actualcapital account flows based on China’sBalance of Payments. The constructed dejure indices quantify the intensity of changesof capital controls, capturing the gradualiststyle that China adopts in implementing itspolicies. The index reveals that China hasbeen increasing its pace of capital accountliberalization in the recent years compared tothe past, and in particular, prioritizesliberalizing controls on outward FDI flowsand equity securities inflows. Theconstructed de jure indices and the respectiveflows for FDI and equity securities are foundto be highly correlated, implying that flowshave been responsive to changes in thecontrols. It also indicates that prior to therestriction lift offs, the capital controls hadbeen relatively effective.”

SHIYU ZHANG, Relationship between RealEstate Market and Stock Market in China

“This paper studies the price fluctuationfrom 2010 to 2016 of two major assets inChina: real estate and stock. Equity price isfound to Granger cause stock price while thereverse relationship is significant but lessstrong. The paper then studies whether thenature of the correlation depends on the typeof city under consideration. This is achievedby grouping 25 cities into four city tiersbased on their level of economicdevelopments and conducting a linearcausality test on each city tier. Housing pricein first tier cities is found to be much moresignificantly correlated with stock price.Larger and more developed cities tend tohave a stronger correlation with stock thansmaller and less developed ones. In addition,the paper also studies the impact of theChinese government’s recent home purchaserestriction on the relationship between thetwo asset classes. However, the results arecontradictory and are not consistent withexpectation. The lack of significant resultscould be contributed to the inherentlimitation of our data, as well as thecomplicated and sometimes confusing policyannouncement mechanisms in China.” ▲

FES Theses from page 9

Where Will FEI Students Be Working?

Congratulations to the following seniors and juniors completing the Financial Economics Sequence who have notified theFEI that they have secured employment or will be attending graduate school.

Graduating Financial EconomicsSequence Seniors:

AHMED ELTAMAMI, Economics-Accounting, Financial Forensics andLitigation Consulting Associate, RSM, LosAngeles, CAJAMES INGRAM, Economics, Analyst in theContract Finance Department, PennyMac,Westlake Village, CAEDUARDO RAMIREZ, Economics, ClientService Associate, Mariner WealthAdvisers, San Diego, CASHARAN SETH, Economics, ProgramAnalyst in the Business Advisory Program inthe Financial Services Office (FSO) at Ernst& Young, New York, NYEMILY ZHANG, Economics, Associate atBerkeley Research Group, Emeryville, CASHIYU ZHANG, Mathematics/Economics,will be attending Caltech, Pasadena, CA, fora Ph.D. in Economics

The Exchange newsletter is published by the Financial Economics Institute at Claremont McKenna College.

Bauer Center, Room 321500 East Ninth Street

Claremont, CA 91711-6400Phone: (909) 607-0042 Fax: (909) 607-0088

E-mail: FEI@cmc.eduWebsite: http://financial-economics-institute.org/

CLAREMONT MCKENNA COLLEGE 11

group an overview of where the advertisingtechnology market is heading in the nextcouple of years. Thomas, who hadpreviously worked in the financial worldprior to joining Google, spoke about hisresponsibilities at Google and the differentcareer opportunities investment banking hadprovided him after his analyst years.

The 2016 New York City NetworkingTrip was a phenomenal success. Many ofthe students spent their final day in the cityscheduling coffee chats with individuals thatthey had spoken to during the trip. Giventhe large number of sophomores on thetrip, interview opportunities were scarce,but the connections and relationships builtwith the many companies visited will serveas an invaluable resource to those interestedin working in New York City or the

financial services more generally. A great deal of thanks must be

extended to the Robert Day School ofEconomics and Finance, the FinancialEconomics Institute, the CMC Alumni andParent Relations Office, the CMC AlumniAssociation, the RDS Advisory Board, andthe many alumni hosts at the various firmsfor their generous contributions that madethis trip possible. ▲

NYC Networking Trip from page 4

NATHAN “GATOR” ADAMS, Economics-Accounting, Summer Analyst, JP MorganAsset Management, Houston, TXERIC BAKAR, Economics, InvestmentAssociate, Fisher Investments, San Mateo,CAJACQUES BIALOSTOZKY, Economics-Accounting, Clifford Swan InvestmentCounselors, Pasadena, CADANIEL FALLON-CYR,Economics/Mathematics, ProductManagement Intern, Intuit, Mountain View,CAJAKE GLASSER, Economics-Accounting,Securities Analyst, Goldman Sachs, NewYork, NYMATTHIEU HAFEMEISTER,Economics/Mathematics, InvestmentBanking Summer Analyst, Wells Fargo, SanFrancisco, CA

NAYANTARA MULLICK, Economics, Salesand Trading Summer Analyst, JP Morgan,New York, NYCONNOR STASTNY, Economics-Accounting,Investment Banking Analyst, HarrisWilliams & Co., San Francisco, CAYUNYI “JOANNA” WANG,Economics/Mathematics, Credit FundSummer Analyst, Fortress InvestmentGroup, Century City, CAHENRY WEI, Economics, Summer Analyst,Wells Fargo Securities, Century City, CACHENG “HARRIS” XUAN, Economics,Business Analyst Intern, Orbital Insight,Palo Alto, CAYI “NORA” ZHANG,Economics/Mathematics, Summer Analyst,Quantum Capital, San Francisco, CA

Financial Economics Sequence Juniors – Summer Positions: