About
- Robert R. McCormick Distinguished Service Professor of Finance
- Nobel Prize in Economic Sciences (2013)
- Fellow of the American Finance Association
Voting History
Question A: Allowing short selling of financial securities, such as stocks and government bonds, leads to prices that, on average, are closer to their fundamental values.
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Question B: When short sellers start to establish substantial short positions in a stock, the stock is likely to have been overvalued.
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Question C: Requiring investors to disclose short positions in a stock at the equivalent threshold as they are required to do for long positions would improve the informativeness of stock prices.
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With some measures of concentration by market capitalization within broad US stock market indices at an all-time high, investors seeking a well-diversified passive equity portfolio should consider alternatives to market-cap-weighted indices.
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Tesla shareholders are likely to benefit substantially from the decision by the Delaware Court of Chancery to void Elon Musk's $56 billion remuneration package.
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Comment: The number seems large, but I don't know how one can tell if it is too large.
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On 10 January 2024, the SEC approved spot Bitcoin exchange-traded products:
https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023\
The SEC's approval of spot Bitcoin exchange-traded products makes investors overall measurably better off.
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Comment: Unless it becomes a widely used medium of exchange, bitcoin should eventually implode. The alternative is that all I learned from monetary theory about how currencies acquire value is meaningless.
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The Biden Administration's recommendation to lower the real discount rate used in the cost and benefit analysis of federal regulations to 2 percent (from the current levels of 3 or 7 percent) will substantially improve regulatory analysis.
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Comment: Depends on the riskiness of the costs and benefits.
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Question A: Harry Markowitz, the Nobel Prize-winning pioneer of modern portfolio theory, passed away earlier this year:
https://afajof.org/news/in-memoriam-harry-markowitz-past-president-of-the-american-finance-association-1927-2023/
Application of the principles of modern portfolio theory allows investors in practice to achieve substantial improvements in the risk-expected return trade-off relative to naive strategies such as equal-weighting that do not take account of return covariances.
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Comment: In the early 1950s Markowitz laid the foundations for portfolio selection. Building on Markowitz, Sharpe (mid-1960s) produced the first asset pricing model. The work on market efficiency in the 1960s and thereafter provided empirical justification for passive investing.
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Question B: Widespread adoption of modern portfolio theory by investors has substantially improved the efficiency of capital allocation in financial markets.
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