Abstracts
Images by Dan Dry and Matthew Gilson
Insider Info or Just Class Notes?
Mutual fund managers put more money into companies run by people with whom they went to college or graduate school, and those investments do significantly better than ones involving no school ties, according to a study coauthored by Andrea Frazzini, assistant professor of finance.
The authors looked at 85 percent of total assets under management from 1990 to 2006 and grouped them by university connection. Investments with no connection returned 11.7 percent a year before fees, while investments made when a fund manager attended school with a company executive returned 20.1 percent a year, on average. Investments with weaker connections—for example, the fund manager and a company executive share an alma mater but attended different divisions or at different times—fell somewhere in between.
It’s unclear whether company executives provide inside information to alumni investors or whether investors simply know more about executives with whom they went to school and thus can make better decisions about their firms. “Everything we have is consistent with both explanations,” Frazzini told the New York Times in June. “We have no evidence of wrongdoing by any of these fund managers.” The Securities and Exchange Commission asked the authors to present their findings to the SEC’s Office of Economic Analysis in July.
The Economics of Mating
Online dating patterns show that, on average, men will consider dating a variety of women as long they are of a certain attractiveness, while women tend to focus on fewer men, placing more importance on such criteria as race, height, education, and profession. However, a man lacking in certain areas can “buy” a woman’s interest if he makes more money, according to a study of more than 20,000 online daters in Boston and San Diego, coauthored by Güenter Hitsch, associate professor of marketing.
Men and particularly women in the study showed a strong preference for same-race partners. To have equal success with white women, African American men needed to earn an extra $154,000; Asian men needed an extra $247,000.
Height was another important category. A 5-foot-8 man could have the same success in getting dates as a 6-foot man if he made $146,000 more than the 6-footer. A 5-foot man needed to make $325,000 more. Meanwhile, men preferred shorter women and avoid dating women taller than themselves.
Findings from the study were reported by the New York Times in April.
Small Groups Better for Solving Big Problems
Including a large number of countries to discuss global economic problems may seem like a good idea, but small groups can get more done, according to Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance. “With many participants no real discussion takes place. Instead they deliver speeches,” Rajan wrote in the Financial Times in May. With small groups of countries, “not only is there a chance of real dialogue, but also promises made to the group have greater credibility,” he said.
Rajan pointed out that the archetypal small group, the G7, is becoming less dominant as the economies of nonmembers China and India grow—their combined GDPs are now roughly equal to the combined GDPs of all the G7 countries, minus the United States. But Rajan doesn’t recommend a “G9.” “Any group that includes all players who have a legitimate role in every important global issue will be too big. It is wiser to adopt a more contingent approach to the world’s economic problems through groups brought together issue by issue.”
