Posts Tagged ‘finance’

Seven top schools face off in Finance Case Competition

Monday, April 15th, 2013

Student teams from seven top schools vied for $15,000 in prizes on Friday (April 12) at the 17th annual Rolanette and Berdon Lawrence Finance Case Competition. The contest, an annual presentation of the A. B. Freeman School of Business at Tulane University, took place in Goldring/Woldenberg Hall II on Tulane’s uptown campus.

Berdon Lawrence, left, and Rolanette Lawrence, third from left, presented this year’s grand prize to a team from Rice University.

Each year, the competition tests the valuation and financial analysis skills of students in a challenging, time-sensitive environment. Students teams are tasked with analyzing a real-world finance case and developing recommendations for the company in question. The students must then present those recommendations to a distinguished panel of judges charged with selecting the top three presentations.

For the second straight year, a team representing Rice University took home first place honors and the competition’s grand prize of $7,000. The University of North Carolina won second place and a prize of $5,000, and the University of South Carolina earned this year’s third place award and a prize of $3,000.

In addition to those schools, other universities participating in this year’s competition included Tulane, University of Texas at Dallas, Vanderbilt and Washington University in St. Louis.

This year’s judges included, left to right, John Raymond, Casey Herman, Chris Conoscenti, and David Grzebinski.

Serving as this year’s judges were Chris Conoscenti (MBA/JD ’01), executive director of Energy Investment Banking at JP Morgan Securities; David Grzebinski (MBA ’93), executive vice president and chief financial officer of Kirby Corp.; Casey Herman (BSM ’86), partner with PricewaterhouseCoopers; and John Raymond (BSM ’92), CEO and managing partner of the Energy and Minerals Group.

The Finance Case Competition began in 1997 and has been sponsored by Mr. and Mrs. Lawrence since 1998. Berdon Lawrence (BBA ’64, MBA ’65) is the founder of Hollywood Marine and former chairman of Kirby Corp., an operator of inland tank barges headquartered in Houston. Kirby purchased Hollywood Marine in 1999. Lawrence is also a member of the Business School Council and a former member of the Board of Tulane.

To see more photos from the competition, including photos of all the winning teams, visit the Freeman School’s Flickr page.

 

 

 


The high cost of high-frequency trading

Monday, December 10th, 2012

On May 6, 2010, the Dow Jones Industrial Average plunged nearly 600 points in five frantic minutes only to regain most of that loss minutes later. The origin of the so-called Flash Crash remains a mystery to this day, but David Lesmond, associate professor of finance at the A. B. Freeman School of Business, has a strong suspicion of the underlying cause: high-frequency trading.

“These high-frequency traders are hitting the market with such rapidity that the markets have to react to them,” says Lesmond, who has been studying the phenomenon for the past three years. “Then other algorithms take over and they sell as well, so you see a contagion effect.”

Associate Professor of Finance David Lesmond says high-frequency trading is largely to blame for increased volatility in the stock market.

High-frequency traders utilize powerful computers and complex algorithms to take advantage of slight price imbalances in the market. HFT firms typically place thousands of orders too small to appear in the consolidated feed of stock transactions, enabling the traders to fly under the radar of Wall Street and quietly gather information about the market. The vast majority of those orders — up to 98 percent — are never executed. Instead, they’re placed solely to probe the market and then cancelled within the blink of an eye. If a market maker tries to fill an order, the high-frequency trader might conclude that a large buyer is present and quickly purchase shares to sell back to the buyer at a slightly higher price. Speed is everything.

“It’s gotten to the point that the high-frequency traders worry about the length of cord that connects the computers,” Lesmond says. “You’re thinking milliseconds at this point.”

While supporters argue that high-frequency traders reduce transaction costs and provide liquidity to the market, Lesmond has a different perspective.

“It’s price manipulation,” Lesmond says. “That’s the principal worry that everybody has about these high-frequency traders. Because if the price doesn’t reflect information, you have no transparency in the market, and if you don’t have transparency in the market, who gets the short end of the stick? The investors.”

According to some estimates, high-frequency trading comprises about 70 percent of all equities trading volume, but Lesmond says it’s difficult to quantify the volume because those trades don’t appear on the consolidated feed of stock transactions. As part of his current research, Lesmond hopes to generate a more accurate estimate of HFT volume and also get a clearer picture of its effects on the market, including whether or not the prices high-frequency traders buy and sell at reflect information.

“My feeling is that the prices do not reflect information in the market, and that’s just catastrophic,” Lesmond says. “If prices can be dictated by these off-exchange things, then we have no hope. That’s by definition what market manipulation is.”

Steps may already be underway to address the problem. Reuters recently reported that U.S. equities markets and regulators have agreed to add trades of less than 100 shares, referred to as odd lot trades, to a feed of real-time market data in an effort to boost transparency.

But according to Lesmond, the real source of the problem remains the low cost of trading. In the wake of the stock market’s conversion to decimalization in 2001, bid/ask spreads dropped to a penny or less,  essentially eliminating cost barriers to trading. High-frequency trading, Lesmond says, was an unintended consequence of the conversion.

Regulators are now considering a tax to be placed on each order to force high-frequency traders to incur some cost for their activities, a reform that Lesmond says could greatly reduce their negative impacts on the market.

“I think regulators mostly want to inhibit high-frequency traders from submitting false trades—the trades that are submitted and then immediately retracted,” says Lesmond. “By instituting a tax on trades, however small, they hope to lessen the frequency of trade and that in turn may help stabilize the market, not to mention government coffers.”

 

 


Analyst recommendations have little effect, researcher says

Monday, May 18th, 2009

Robert HansenIn a new paper to be published in Journal of Accounting and Economics, Robert S. Hansen, Francis Martin Chair in Business and professor of finance and economics,  suggests that analysts’ recommendations have little effect on stock prices. The study, co-authored with Oya Altinkiliç of the University of Pittsburgh, found that when an analyst changes a recommendation on a stock, the share price moves on average  just 0.03 percent, far less than had been suggested in previous research.

To learn more about the study, see this Financial Times story as well as this mention in  the New York Times.


Students try to beat the S&P 500

Friday, May 15th, 2009

Associated Press business writer Alan Sayre sat in on the final class of the semester for the Darwin S. Fenner Student Managed Fund and wrote this article about the course, in which students manage a $1 million endowment fund with the goal of outperforming the S&P 500. Since Associate Professor of Finance Sheri Tice took over the program in 2002, students have consistently managed to achieve that goal.


Top-tier schools compete in Finance Case Competition

Wednesday, April 22nd, 2009

Berdon and Rolanette Lawrence (second and third from left) with members of the Rice University team

A team of students from Rice University took first place and the grand prize of $5,000 at this year’s Rolanette and Berdon Lawrence Finance Case Competition. The competition took place at the Freeman School on April 17.

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Financial Times ranks Freeman 10th globally in finance

Monday, January 28th, 2008

Freeman was ranked 10th globally by the Financial TimesIn its latest survey of global MBA programs, the Financial Times has named Tulane’s Freeman School of Business one of the 10 best schools in the world in finance. The 10th place ranking, which appeared in the Financial Times on Jan. 28, is based on the recommendations of more than 11,000 MBA alumni from around the world who responded to this year’s Financial Times survey.

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