NEWS
Clips

Effects of Unemployment
Why does the rise in unemployment affect various sectors of the population differently? In the April 10 Chicago Tribune, Robert Topel, Isidore Brown and Gladys J. Brown Professor in Urban and Labor Economics, said black workers experienced a rise in unemployment during March while white workers remained unaffected because more African Americans are represented in manufacturing and other hard-hit sectors.

Investors and "Myopic Risk Aversion"
In the April 8 New York Times, Richard Thaler, Robert P. Gwinn Professor of Behavioral Science and Economics, explained that investors sometimes suffer from "myopic risk aversion." According to Thaler, this aversion is characterized by a tendency to continually reevaluate performances and by greater sensitivity to losses than to gains. Research by Thaler and three psychologists - Amos Tversky, Daniel Kahneman, and Alan Schwartz - found that investors who looked at their performance most often had the lowest average equity exposure. Frequent checkers not only reduced their stock exposure immediately after a loss, but also had lower average equity exposures during all subsequent months, the research found. The article was titled "Strategies: The Blinding Power of Data." In another discussion on behavioral economics, Thaler told National Public Radio's Morning Edition that personal savings rates may be dramatically improved with the help of company programs. The report aired nationally on April 5.

Life Insurance Premiums Plunge
According to a study by Austan Goolsbee, associate professor of economics, and Jeffrey Brown of Harvard University, the recent price plunge in life insurance premiums is directly related to the popularity of online insurance sites. In an article titled łThe E-surance Trap,˛ the April 10 issue of Time quoted findings from the study, which found that insurance Web sites account for as much as half of the decline in term-life prices from 1995 to 1997. Such sites as InsWeb.com and Quotesmith.com, which allow consumers to pinpoint the best rate without having to contact an agent, are suffering profit woes because they have not found a way to ease the application and purchasing process.

Growth Stocks Provide Limited Gains
Growth stocks may not necessarily be the best investments, according to Eugene Fama. The February issue of Money magazine cited Fama's 1992 work "The Cross-Section of Expected Stock Returns" as the touchstone study that found growth stocks generally have made less money for investors than have other types of stocks. Fama is Robert R. McCormick Distinguished Service Professor of Finance.

The Death of Beta-Stocks?
The theory that high-beta stocks are riskier than low-beta ones but offer better returns over the long run is incorrect, according to research by Eugene Fama that was cited in the April 18 Forbes. In a paper cowritten in 1992 with Kenneth French, Fama found that no correlation exists between risk and return. The magazine quoted Fama as saying, "Beta is dead."

Back to School for Dot-Com Dropouts
According to the March issue of CFO Magazine, dot-com dropouts are increasingly returning to business schools to complete their M.B.A. degrees. "It's a testament to the idea that they still think there are things left to learn, that maybe they don't know as much as they thought they did," Ellen Rudnick, clinical associate professor of entrepreneurship, told the magazine. Rudnick said that students who come back are often seen as a rich resource for classmates because they "bring home the real-world situation of how difficult, or easy, it is to raise money."

Recognizing Restructuring Charges
The April 4 Wall Street Journal quoted J. Douglas Hanna in a story about Procter & Gamble's frequent use of restructuring charges. According to research by Hanna, associate professor of accounting, more than a quarter of all companies filing with the SEC take a charge each year, up from 1 percent in 1970. With the rise in companies booking such charges, Hanna told the paper, "it's just not safe to ignore."

Boeing's Chicago Strategy
Boeing's decision to move its headquarters from Seattle to Chicago is a strategic move that reflects the growing number of mergers in the airline industry, Thomas Hubbard, assistant professor of economics and strategy, told the March 22 Seattle Times. "They want to stay competitive with [archrival] Airbus," Hubbard said. "Being in Chicago would probably mean they'll be able to talk to those [United] executives a lot more often." While Boeing officials have suggested for the past decade that they would move parts of their local operations elsewhere, few suspected a change in headquarters.

How to Pick Top Stocks
The April 17 Dow Jones News Service featured new research on stock picking by Joseph Piotroski, assistant professor of accounting. Using measures of profitability, capital structure, and operating efficiency, Piotroski created a nine-point scale that grades low book-value companies. Analyst Paul Sturm told the news service, "The results are among the most impressive I've seen in academic research." The Dow Jones story said Piotroski's methods "turn out to be a wonderful way to separate winners from losers." Piotroski recently received an award for the best paper written by a junior member of the GSB accounting faculty.

Chicago GSB E-expertise
The February cover story of i-Street named Steven Kaplan (left), Austan Goolsbee, Ellen Rudnick, and James Schrager as leading academics in entrepreneurship and technology. According to the article, "If there's a tax on Internet enterprise, Goolsbee will be a part of the debate." The magazine also called Kaplan, Neubauer Family Professor of Entrepreneurship and Finance, "one of the biggest names in Chicago's entrepreneurial community." Goolsbee is associate professor of economics; Rudnick is clinical associate professor of entrepreneurship; and Schrager is clinical professor of entrepreneurship and strategic management.

When Investors Sell Stock
Investors are more likely to sell if they have seen their accumulated stock market profit completely melt away, Nicholas Barberis told the Wall Street Journal in March. "Some of the early dips in Nasdaq weren't taken that seriously, because people still had very healthy gains from the past few years," said Barberis, assistant professor of finance. "But after the big drops [in February], some people have had their entire gains wiped out. That's when they get really scared and head for the exit." The story also appeared in the paper's Asian and European editions.

GSB's Global Clout
The GSB's Singapore campus was featured in a Far Eastern Economic Review story about the increasing globalization of business schools. The article noted that students travel from as far away as India and China to participate in the GSB's Executive M.B.A. Program Asia. "What do the Western programs offer that's worth so much?" the magazine asked, answering, "Chicago's faculty has the most Nobel laureates of any business school in the world."

New Economy Jobs Less Popular
The allure of dot-com jobs was exaggerated last year, Glenn Sykes told the New York Times. Sykes, who directs Chicago GSB's career services office, said only 14 of the more than 500 GSB graduates last year preferred dot-com jobs over traditional employment. The article, "Business Students Do an About-Face: Recruiters for Banks and Consultants Have Regained the Upper Hand," appeared in the paper's February 14 edition. --T.T.