Graziadio Business Report Blog

Davide Accomazzo, MBA

In my many years as a derivative trader and hedge fund manager, I forged a solid and long-lasting relationship with risk. Like a beautiful but dangerous woman, risk permeated my professional life—a constant courtship leading me to many attempts at fully understanding its mysterious ways. A never-ending effort!

The theoretical foundations of risk analysis were laid in business school where I diligently learned of Alpha and Beta, Random Walks and Efficient Market Hypotheses (EMH).* These theories were elegant and pure, like a fresh mantle of snow they seemed to perfectly cover all market uncertainties and provided a boost of confidence to a young man ready to leave his mark in Wall Street. Continue reading ‘Beta(ful) Market Hypotheses’

This post first appeared on Dr. Forsyth’s blog, Financial Wisdom Preparatory Institute.

Joetta Forsyth, PhD

I recently had a bad encounter with a bank. However, there is a basic principle that I follow that kept me from financial harm.

I applied for a business credit card, which I wanted to facilitate payments and I intended to pay off each month. It was a little late in the day and the person who handled business accounts had left. Another person at the next desk over offered to “help” me.

I explained that I wanted to take out a business credit card and gave him my business checking account ATM card, which he used to look up my account. He told me about a “great deal” on a card — I wouldn’t have to pay fees to get the frequent flyer miles, etc.

I told him that I was confused because I had called the bank and they did not tell me those terms. His reply, delivered with a beaming smile, was that it was a special offer only given in person. I asked to see the terms and conditions, and he told me that they would be mailed to me after I applied for the card. I had to ask twice more. I flat out refused to apply for the card without seeing the terms and conditions first. He finally gave up and went to print them out. I told him I would read them and come back the next day. At home, I discovered that the right side of the print out was cut off and I couldn’t even tell what it said. Continue reading ‘My Shocking Bank Experience and the Need to Read Terms and Conditions’

Nancy Dodd, MFA, MPW, Academic Editor

I have been teaching with Frances Grimes in the Management Communications program here at Graziadio this fall and so business communication is on my mind.

Face-to-face business communication is difficult—attempting to read body language, facial expressions, and gestures (although some gestures speak for themselves), can be a challenge. Not to mention cultural differences that can blur the meaning to any one or all of the above.

Even more difficult can be written communication when there are no expressions and gestures to guide us. Add poor grammar, haphazard punctuation, and misspellings… well, we all know where that can lead. Then mix in the language of different cultures and disciplines, and you can really have a problem.

I once wrote an email to someone in another department who was handling our IT. Since we were just starting to develop audio and video, I needed extra help with a particular project. In the email I wrote that I just needed a download of the file in a new format for “audacity.” The recipient of the email responded not quite in the way I expected, offering to do something quite different than I requested. Continue reading ‘5 Simple Rules for Better Email Business Communication’

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In this video interview, David M. Smith, PhD, Associate Dean of Academic Affairs and Associate Professor of Economics at the Graziadio School of Business and Management discusses the impact of the American Reinvestment and Recovery Act so far, the fate of female and older workers in this down economy, and which sectors of the California economy are likely to bounce back. Continue reading ‘The State of the New Economy’

The telegraphed day of reckoning has finally arrived and many commodity exchange-traded funds (ETFs) and exchange-traded notes (ETNs) are now finding themselves in the regulatory line of fire.

I have been on the record with my MBA students and with many of my colleagues in the investment business for quite some time regarding the multitude of problems associated with commodity ETFs. Finally, it seems corrective actions are being taken.

Just recently, UNG, the ETF that attempts to track natural gas futures’ performance, was subject to massive price distortions. UNG built a premium into its price versus its net asset value (NAV) of as much as 20% due to large inflows of money, which, ultimately, reflected investors’ bottom fishing. UNG was suddenly unable to expand its position due to an abrupt fear of breaching position limits in the futures pit.

The lesson learned? When an ETF cannot deliver on its strategy because of regulatory fear, the model is pretty much broken. Continue reading ‘Welcome to a New “Normal” in Commodities?’

Wayne Strom, PhD

Today’s harsh economic realities continue to impact everyone. Hundreds of thousands have been losing their jobs each month. In California, even firemen and policemen are being laid off (California firemen are being laid off even as we approach fire season!). It does not matter if you work for a private enterprise or a tax-supported agency.

Everyone is somewhat at risk. Everything is somewhat on the line.

An attorney friend once told me, ‘When you have a fire, you get to choose: you can pour on water, or you can pour on gasoline.’ This is absolutely true in our business relationships.

When people feel at risk, they become anxious and can easily rise to defensiveness. Negotiations, even over the smallest issues, can become brittle.

But to pour on gasoline does not mean that one is operating from a position of strength and confidence! It does not signal the other person that you are competent to deal with what is happening. If I anxiously enter a business conversation, or if I am even just a little apprehensive (a form of defensiveness), or perhaps a little pushy, I may be setting the stage for a defensive push-back or confrontation. Continue reading ‘The Business Imperative for Staying Calm During Stressful Times’

Can’t see the video above? Click here to watch or read the transcript.

In this video interview, Davide Accomazzo, MBA, Adjunct Professor of Finance at the Graziadio School of Business and Management, discusses the dangers of high frequency trading. This interview is a follow-up to Professor Accomazzo’s essay for the GBR blog on the same topic. Continue reading ‘The Danger with High Frequency Trading’

Can’t see the video above? Click here to watch or you can read the transcript.

In this video interview, Kurt K. Motamedi, PhD, Professor of Strategy and Leadership at the Graziadio School of Business and Management, discusses strategy, strategy execution, leadership styles (including neurotic managers and their impact), keeping employees motivated, and the shift away from economic opportunism occurring in the U.S. and worldwide. Continue reading ‘The Art of Strategy During a Recession’

Can’t see the above video? Click here to watch or read the transcript.

In this video interview, John K. Paglia, PhD, Associate Professor of Finance at the Graziadio School of Business and Management, discusses the Pepperdine Private Capital Markets Project, which was released on July 27, 2009, in conjunction with a Los Angeles and California statewide economic forecast that Pepperdine partnered to deliver with Beacon Economics and the Los Angeles Area Chamber of Commerce. The study has been featured in the New York Times and the Wall Street Journal. Continue reading ‘VC Firms Still Expecting High ROIs’

As a professional trader, you are confronted daily with all kinds of dynamics and situations that require a flexible and adaptive mind. You are faced with multiple variables constantly interacting with each other and your task is to process ever-changing information quickly and profitably. Valuations arbitrage, reflexive supply-and-demand dynamics, and structural changes are recurrent landmines in the typical day of traders and money managers.

We accept this “dangerous” line of work for only two reasons: monetary compensation and pride in being part of capital markets, that transmission mechanism without which innovation and creativity would be prisoners of their own ethereal state.

As a society, we are ready to strike compromises in return for a system that will allow the ethereal state of our creativity to turn into reality. We allow market insiders like market makers, broker-dealers, and others to have small advantages over us mortal investors in order to have them create the positive externalities that help us build a more sophisticated economic system. We give market makers and specialists a privileged look at the order flow (the supply and demand of stocks) in exchange for their commitment to maintaining orderly markets whenever an imbalance occurs. We give systemic firms like JP Morgan and Goldman Sachs privileged access to liquidity via the Federal Reserve so that the banking system and capital markets can continue to serve us in our quest to invent, produce, and distribute new products.

But sometimes things turn out more like a bad inland casino rather than a better market…

We may still be reeling from the systemic economic collapse of last year, but new structural changes with potential negative externalities are already at our door.

For months I have witnessed strange dynamics in the way markets behaved: liquidity issues, intra-day volatility, and a constant disconnection between technical, sentiment and fundamental inputs. Markets often go through periods of irrationality, but this time it felt different.

As a professional trader and an educator on markets, my sensitivity level is higher than normal and I immediately began conducting research to make sense of my discomfort. This process pointed consistently to one element: high frequency trading or as I like to call it “the rise of the machines.” Continue reading ‘High Frequency Trading: The Rise of the Machines’