Journal of Applied Finance

Journal of Applied Finance is a trade journal focusing on Applied Finance

Articles from Vol. 18, No. 2, Fall

An Interview with Vernon L. Smith: 2002 Nobel Laureate in Economic Sciences and Father of Experimental Economics
"For having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms"-2002 NobelOn January 9th 2009, Terry Odean and Betty Simkins interviewed Vernon L. Smith for this issue...
Behavioral Basis of the Financial Crisis
Financial institutions suffered large losses following the collapse of the credit markets despite making huge risk management investments. Major risks are frequently ignored due to behavioral biases resulting in incorrect decisions. These biases are...
Behavioral Finance: Quo Vadis?
Behavioral finance endeavors to bridge the gap between finance and psychology. Now an established field, behavioral finance studies investor decision processes which in turn shed light on anomalies, i.e., departures from neoclassical finance theory....
Book Review: Ending the Management Illusion: How to Drive Business Results Using the Principles of Behavioral Finance
Book Review: Ending the Management Illusion: How to Drive Business Results Using the Principles of Behavioral Finance By Hersh Shefrin, McGraw Hill: 2008, vii + 317 pagesSomeone whose business responsibilities or research areas do not overlap with behavioral...
Financial Puzzles
With the previous issues of JAF, we began publishing Financial Puzzles by Stewart C. Myers. This set (problems 14-15) is the fifth installment. The solutions for the previous set are also given below.-The Editors14. This problem considers how corporate...
Letter from the Editors
This is our second issue as editors of the Journal of Applied Finance (JAF). We were delighted to note that the first issue was received very well by our readers and we wish to thank all who sent us their feedback. We received positive feedback on the...
Shareholder Theory - How Opponents and Proponents Both Get It Wrong
Shareholder wealth maximization is accepted by most financial economists as the appropriate objective for financial decision-making. Recently, wealth maximization has been criticized by a growing array of opponents for condoning the exploitation of employees,...
Student Managed Investment Funds: An International Perspective
The most comprehensive survey ever conducted on student managed investment funds shows there are now 314 universities worldwide that offer students the chance to learn about portfolio management by investing real money. In aggregate, students are directly...
The 2008 Federal Intervention to Stabilize Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are government-sponsored enterprises that play a central role in US residential mortgage markets. In recent years, policymakers became increasingly concerned about the size and risk-taking incentives of these two institutions....
The Effects of Institutional Risk Control on Trader Behavior
We examine how institutional risk control mechanisms influence proprietary stock trader behavior. When traders are forced to liquidate their inventory at a pre-designated time, they often hold onto their losing trades until the very last moment. We find...
The Venturesome Economy
The Venturesome Economy By Amar Bhidé, Princeton University Press: 2008, ix + 499 pagesIn The Venturesome Economy (2008, Princeton University Press), Amar Bhide offers an in-depth, refreshingly optimistic, and insightful counterpoint to the increasingly...
University of Rochester Roundtable on Bankruptcy and Bailouts: The Case of the US Auto Industry
The GeVa Theatre Rochester, NY February 2, 2009Panelists: Thomas Jackson, Charles Hughes, James Brickley, Joel Tabas, and Clifford SmithMark Zupan: Good evening, and welcome to this discussion of a very topical and pressing issue: today's problems with...
Why Do People Trade?1
Besides trading to save, manage risk, and speculate, people trade simply because they find it entertaining. In a survey of 1,300 German discount brokerage clients, respondents who indicate that they "enjoy investing" and "enjoy risky propositions" trade...