Should students use laptops in the classroom?

Step into any classroom and you'll see rows of students with laptops open tapping away at their keyboards.  Some of these students are taking notes, some are checking facebook or instagram.

Aside from distractions, I've wondered whether laptop usage is a good thing or not.  Turns out, the evidence is pretty clear.   We shouldn't use laptops for note taking.

Here are a few articles...

Scientific American reports that deeper understanding comes from handwritten notes:
http://www.scientificamerican.com/article/a-learning-secret-don-t-take-notes-with-a-laptop/

See also:
http://lifehacker.com/the-benefits-of-writing-by-hand-versus-typing-1778758792

Laptops are a distraction to not just the owner, but also other students: http://www.rcinet.ca/en/2013/08/20/new-study-shows-computers-in-class-distract-both-users-and-non-users/

And one Prof even writes about being a Luddite:
https://www.washingtonpost.com/posteverything/wp/2016/04/28/confessions-of-a-luddite-professor/

I think that we should seriously consider imposing laptop bans in classrooms, but also encourage online students to be low-tech and keep notes using pen and pencil.

New editors of the Financial Review

A little shameless self promotion. Srini Krishnamurthy and myself are honored to take over as editors of the Financial Review.
The full details are over on the Poole College of Management site

The Financial Review website is here: financialreview.poole.ncsu.edu

Do CEOs time option grants relative to stock splits?

This post is based on a paper coauthored with Erik Devos of UTEP and Bill Elliott of John Carroll University.



To answer this question, we need a quick recap of options and splits.

Stock option grants frequently make up a significant portion of CEOs' compensation packages.  Typically an option is granted to the CEO "at the money" meaning that the strike price is set close to trading price of the stock.  If the stock price increases after the option grant, the value of the option will increase.  This is a standard property of call options and is the prima facie reason for granting them in the first place.

Stock splits are, by and large, cosmetic changes to the stock.  A 2 for 1 stock split results in each share of stock being replaced with 2 shares.   In such a split, the stock price should fall in half, so a $100 stock will split to two $50 stocks.   In reality, the $100 stock splits (on average) into two $51.50 stocks.   In effect a $3 or 3% gain in value occurs on the announcement day of the split.  The key thing to note here is that this is "on average".  Why this occurs is a bit of a mystery and beyond our discussion today.

So given these two factoids - options are granted at the money and stock splits result in a price increase (split adjusted) - when would a CEO most likely want to get an option grant?  

A. Before the split announcement.

B. After the split announcement.

C. The CEO shouldn't care.

If you answered A, then you'd be right - and this is supported by the data.

This figure shows the number of grants made relative to the split announcement.  Clearly, there is clustering before the announcement on day 0.  So what's going on?

Because a grant is granted "at the money", the 3% price bump that occurs on the split announcement results in an immediate increase in value for the holder of the option.  Therefore a CEO would prefer to get his/her options before the split rather than after it. 

But the story is more tricky - as this result holds for scheduled grants (grants which occur at a pre-determined time each year).  This means that in some cases the split announcement is being timed relative to the grant.

OK but so what?

On average, by granting before the split, a CEO will see his/her wealth increase by more than $450,000!   This is based on the size of the grant and the effect that a 3% stock price increase has on the value of the option.

In case you are wondering, CEOs also appear to time their stock trades relative to split announcements.

These findings are forthcoming in the Journal of Accounting and Economics in the following paper:

“CEO Opportunism?: Option Grants and Stock Trades around Stock Splits” 

Erik Devos, William Elliott, Richard S. Warr
Forthcoming: Journal of Accounting and Economics.

A copy is available for download on my website.

NC State Jenkins Online MBA is ranked #9 by US News.

Fantastic news today.  Our online MBA program is ranked #9 by US News.  From the beginning, we focussed on creating a very high quality experience for our students, and it's nice to see that this focus has paid off.

http://www.usnews.com/education/online-education/north-carolina-state-university-raleigh-OBUS0421/mba

For details about the Jenkins MBA - check out this link.

Multitasking in class?

Most professors allow students to use laptops in class.   Many students use them to take notes, to look at spreadsheets etc - but many students also use them for multi-tasking.  And I use the term "multi-task" very broadly.

When I sit in other professor's classes to review teaching, I often am surprised by the amount of "multi-tasking" that is going on.   I usually sit at the back where I can get a good view and invariably, students that are engaged in "multi-tasking" are on facebook, checking the weather, checking email etc.   They aren't really multi-tasking, they are just doing a different task from what they are supposed to be doing.

That's why this article was particularly interesting to me.   A Professor of New Media at NYU has basically banned laptops from class (except for specific projects).   He's reporting a much improved environment.

A counter argument from a student might be:"Hey, if the prof says anything interesting or important, I'll pay attention", but I think this is perhaps a little delusional.   I know that if I am at home watching a movie and in the quiet bit, I answer an email on my laptop, I invariably end up having to ask my wife: "what happened?"   I am pretty sure that I can't multi-task effectively.

"Close the business schools!!" says English Professor.

An amusing rant from a humanities professor who seems to have an axe to grind with B-Schools and Finance Profs in particular.  Whenever you read an article in which the market is referred to in quotes, as in: "the market", you know that what follows is going to be a complete failure to understand the basics of supply and demand.  

Why would a non-profit issue taxable bonds?

To avoid regulation.   Apparently, universities are increasingly issuing taxable bonds (where the bond buyer has to pay taxes on the interest) in order to get greater flexibility in where those funds can be used.   In effect, the borrowers are paying more interest to avoid covenants imposed the federal government.

Finance research summarized for non-academics

Check out this new online journal/magazine that reproduces summaries of top finance research targeted at a broader audience.   This is an excellent idea and the first two issues contain some really good papers.

http://fame-jagazine.com/

It comes at a time when some people are questioning whether academic research in business is a positive NPV project. 

Steve Allen talks about "Mooconomics"

Great post by my colleague, Steve Allen on a recent MOOC offered by John Cochrane of Chicago.

What determines research productivity in university departments?

A recent paper attempts to tackle this question and finds that the total citation count of the incoming department chair's research publications is a strong predictor of future departmental research output.

In other words, if you want to up your department's research, appoint high powered researcher as the chair.

Professors charged with illegal shorting.

Two professors (from Florida State) are caught by the SEC for illegal naked shorting.   While they don't admit guilt, they did agree to pay a hefty fine.

Shorting isn't illegal, but naked shorting can be.  Naked shorting occurs when you sell a stock that you don't own and then fail to deliver the stock to the person you sold it to.

HT:Rob.

Masters of Supply Chain and Engineering Management

If you are interested in getting a 1 year masters in Supply Chain with  an emphasis on the engineering side of things - check out this new program that is joint with my department and Industrial Engineering at NC State.

Is a PhD important in investment management?

Not surprisingly investment managers with PhDs in Finance outperform those without the degrees.  So from an investor's point of view - this might be a reasonable screening tool when evaluating managers.  

From a manager's point of view the NPV of a PhD is probably less clear.  

NC State Professional MBA ranked number 20 in US

Big news for our MBA program - we were just ranked number 20 in the US by BusinessWeek.

My colleague Steve Allen has some of the details.

Another MOOC - this one is on Pension Fund finance

Here's another MOOC, this time on Pension Fund finance.  https://novoed.com/rauh-finance/

Josh Rauh is one of the leading academic researchers in this area.  This course should be required for anyone who has any involvement with Pension Funds.

Asset Pricing MOOC

If you are interested in Asset Pricing (the pricing of financial securities), then you might be interested in a MOOC being taught by John Cochrane of the University of Chicago.  

Cochrane is an expert in asset pricing - he wrote the book, actually, a book called "Asset Pricing", he also blogs as the Grumpy Economist.

This is one of the first high level finance MOOCs that I've seen.   Be warned though -- the content will be pretty mathematical.

Is that in the book?

Brilliant.

Academic Spam...

I need to set up this filter.  I might also add "open journal" as well.

From PhD Comics

NCSU - Poole College of Management #6 in a national ranking.

Yes you read the title right.  The Poole College is #6 in the ranking of the best undergrad Operations Management program.

If you're a student or alum - spread the word!

Top 10 highest paid college majors.

Engineering, computers and finance.