11.17.2004

Of Efficient Markets and Grilled Cheese

Last week the Globe and Mail ran an article about how people are using their blogs to find work. This phenomenon seems to be mostly limited to IT job-seekers at present, but you never know. It seems like a trend that is bound to spread to other functional areas, including finance. It's a great way for an employer to quickly get to know an applicant, what with "organizational fit" (being liked) becoming more and more important these days. Although I shudder to think about what a potential employer might think of me based on some of the things I've written here.

The fall recruiting season for permanent jobs is pretty much over now here at Rotman. I interviewed with four firms, but didn't receive an offer. That's okay though, because although it certainly would have been nice to have a job and a salary locked up at this point, I think it will give me the opportunity to cast my net a little wider. Fall recruiting is dominated by large organizations, primarily investment banks and consulting firms. These are companies that hire a number of MBAs almost every year, and have a good idea what there staffing needs will be 8 to 10 months down the road. Smaller money management firms, hedge funds, and many others do their hiring on an as-needed basis, so I'm still optimistic there will be firms hiring in the Spring. These are typically jobs I'll need to go out and find for myself - they won't be posted at our Corporate Connections Centre. From all accounts the Canadian economy is strong and demand for MBAs is up this year. Stay tuned.

Turning my addition now to inside the classroom, let me preface this by saying that the last thing I want to do is slag Rotman. This is head and shoulders the best MBA finance program in the country, and the quality of the instruction is simply outstanding. What I'm learning is going to add a lot of value to my future employer (I know you're reading), but even so, its frustrating to hear finance professors discuss market efficiency. The EMH (Efficient Market Hypothesis) implies that all public information is reflected into a stock's current price. The implication is that neither fundamental nor technical analysis can be used to beat the market. Our professors will diligently present both sides of the argument, but in most cases its easy to detect where their allegiance lies. There are notable exceptions, but they believe markets are efficient. Some can barely hide their palpable disdain for technical analysis, even though out in the real world investment firms, for some reason, continue to pay people to perform this kind of work.

One of the most interesting things I've read lately, which I happened upon via MBANews, is a paper suggesting that option writers will purposfully manipulate the price of a stock. The paper was authored by Sophie Ni, Neil Pearson and Allen Posteshman. From the abstract:

This paper presents striking evidence that option trading changes the prices of underlying stocks. In particular, we show that on expiration dates the closing prices of stocks with listed options cluster at option strike prices. On each expiration date, the returns on optionable stocks are altered by an average of at least 16.5 basis points, which translates into aggregate market shifts on the order of $9 billion. We provide evidence that...stock price manipulation by firm proprietary traders contribute(s) to the clustering.

Here is the link to the full article (PDF format). This is something I've known intuitively for a long time, but to see it formally presented in this way is reassuring. Now, does this sound much like an efficient market?

There are lots of interesting things going on in equity markets now. The IPO market is heating up again, a la the roaring 90's. In the past 3 months alone there have been 2 issues that have tripled from their offering price, 3 more that have doubled and 6 more that have increased at least 50%. The next big one looks like Portal Player, which is set to go public this week. "People want a piece of the iPod, and they haven’t had too many chances". Should be interesting to watch.

I usually enjoy writing about pop culture, but this is one of those weeks that makes you ashamed to be part of the human race.

I've always felt that we need more award shows, celebrities in general are too hesitant to pat themselves on the back. Case in point, this weeks American Music Awards where a rambling, incoherent, off-balance Anna Nicole Smith stole the show on the red carpet, as a presenter and backstage afterwards. She even upstaged Kanye West when he whined publicly about losing for best new artist.

All this was even topped by last night's Vibe awards, which erupted into an orgy of stab-crazy violence. I have to conclude that getting that many rappers together in one place just isn't such a good idea. At least some sanity was restored to the world when EBay stopped bidding for this grilled cheese sandwich that looks like the virgin Mary, once the bidding reached $22,000.


1 Comments:

Blogger Unknown said...

So many blogs and only 10 numbers to rate them. I'll have to give you a 7 because you have good content but lack of quality posts.

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