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’

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 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’

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

Continue reading ‘What’s Next LA: The Road to Economic Recovery (A Preview)’

Viewing this in a reader? Click here to watch the video or you can read the transcript.

Continue reading ‘Econ Profs Question Conventional Buy-and-Hold Wisdom’

In the ongoing social debate on what kind of an economic system we should build on top of the rubble of the present financial mess, we as investors should focus less on the philosophical nuances and more on how to adjust our investment framework, expectations, and tactics.

As the work of free-market proponents Milton Friedman and Margaret Thatcher falls to pieces under the weight of human greed and hubris, it is important to acknowledge that greed and hubris were also the culprits in past socio-economic collapses: communism, failed monarchies, etc. It seems safe to say that whatever policy will be implemented next will carry within its DNA the same self-destructing gene.

History may not repeat itself but it certainly rhymes, as Mark Twain once said.

Continue reading ‘Of Alphas, Betas, and Predetermined Rates of Returns’

The results of the second GBR poll on debt vs. savings are in!

• All participants said they have changed their personal financial approach due to the current economic instability
• 60% say they are working harder to pay down all their debt.

The GBR Blog asked Davide Accomazzo, Adjunct Professor of Finance at the Graziadio School of Business and Management, to comment on the results and offer some practical advice on riding out the economic turbulence. He wrote: Continue reading ‘The Basics of a Balanced Personal Financial Strategy’

The GBR Blog wants to know:

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Do you have a different approach to saving? Tell us in the comments.

UPDATE: This poll was closed on May 18, 2009. Read our analysis of the poll and learn about “The Basics of a Balanced Personal Finance Strategy,” by Davide Accomazzo, Adjunct Professor of Finance.