James Felton

Preference for Risk in Investing as a Function of Trait Optimism and Gender

This research examines the role of gender and optimism on the riskiness of investment choices of students (N = 66) in a semester long investment contest with both monetary and academic incentives. Data suggest that males make more risky investment choices than females, and that this difference was primarily due to the riskier choices of optimistic males. In addition, males demonstrated greater variability in final portfolio value than did females. Our results suggest that 1) the well documented gender difference in investment strategies of men and women may be due to a specific subgroup of males (i.e., optimists); 2) that optimism may lead to different behavioral tendencies in men and women depending on the domain; and 3) that the benefits of optimism may be restricted to domains in which continued effort and information seeking are likely to lead to desired outcomes.

Attractiveness, easiness and other issues: student evaluations of professors on Ratemyprofessors.com

Felton, Mitchell and Stinson (2004) reported that web-based student evaluations of teaching (SET) demonstrated a student preference for course easiness and instructor sexiness. This study explores these same relationships with a larger and improved database. Results indicate even stronger relationships than previously reported. In addition, this study demonstrates significant cultural differences by institution and discipline in the relationships between quality, easiness, and hotness in web-based SET.

The Concentration of Commercial Success in Popular Music: An Analysis of the Distribution of Gold Records

This paper examines whether commercial success in the popular recorded-music industry, as measured by gold-record output, conforms to an empirical concentration. We find that Lotkas Law overestimates the number of artists with one gold record and underestimates the number of multiplegold-record performing artists. However, for all measures of “successful” records, theGeneralized Lotkas Law provides an excellent fit, which suggests that the number of performers producingn gold records in about 1/nc of those producing one gold record.

Exchange Traded Notes: An Introduction

The first Exchange-Traded Note (ETN) was introduced in 2006. Since then, at least 64 other ETNs have been issued, with more announced. This financial security, which is growing in number and popularity, is often confused with Exchange-Traded Funds (ETFs) and seems to be largely misunderstood by the general investing public and even by institutional investors and academicians. Since no academic work has been published on the subject, this article offers a seminal introduction to ETNs. It provides five basic categories of information: 1) descriptive information about ETNs, 2) fine print related to ETNs that we believe investors should understand before purchasing shares, 3) a few simple examples of ETNs that are available, 4) a simple analysis of how closely ETN market prices track their indicative values (something akin to NAV), and 5) a discussion of why ETNs may appeal to various investor classes. The authors believe this article will provide the catalyst for much future empirical work on these financial securities.

Nominal GPA and Real GPA: A Simple Adjustment that Compensates for Grade Inflation

Grade inflation is a long‐standing problem whose seriousness is demonstrated by a wide variety of studies of grade distributions. A few institutions have changed the information on their transcripts in an effort to account for it. Proposals to index grades have been largely unsuccessful for a variety of reasons. A simple index, the Real GPA, is calculated as a ratio of the individual student’s instructor‐assigned GPA to the average GPA of the class and expressed numerically on the same scale as the inflated assigned grade. Recorded on transcripts next to the Nominal GPA, the Real GPA makes the relative degree of inflation in a transcript immediately visible and creates positive pressures on academic standards.

The Indicative Value–Price Puzzle in ETNs: Liquidity Constraints, Information Signaling, or an Ineffective System for Share Creation?

The prices of ETNs often significantly exceed their indicative values. Since ETNs share many features in common with zero-coupon bonds, this empirical finding is unexpected. (Adopting the language of Wright, Diavatopoulos, and Felton (2010), we refer to this as the negative WDFD puzzle.) Using a sample of 93 ETNs over the period June 6, 2006 to December 31, 2009, we explore three possible explanations for the negative WDFD puzzle. We find that the puzzle is not a result of liquidity constraints. In fact, increased trading volume is mildly correlated with more extreme mispricing in ETNs. We also find that ETN prices significantly exceeding their corresponding indicative values do not possess information about the future prospects of the asset, commodity, or index tied to the ETN. Instead, we conclude that the negative WDFD puzzle is the result of (1) uninformed, return-chasing investors and (2) an ineffective current system for creating new shares of existing ETNs. To work towards eliminating the negative WDFD puzzle, we recommend that ETN issuers restructure their systems for creating new ETN shares by allowing profit-motivated investors to initiate the process of share creation as they identify extreme mispricing in the market place.

Real GPA and Real SET: Two Antidotes to Greed, Sloth, and Cowardice in the College Classroom

Recently published evidence of limited learning among American college students confirms the damage done when students, faculty and institutions pursue interests that conflict with the educational process. The ‘disengagement compact’ in which faculty tacitly trade lenient workloads and grading for higher student evaluation of teaching (SET) scores and fewer complaints from students does damage wherever it operates. The work of Johnson confirms the link between SET and grade inflation. We propose a modification of an earlier grade index, the Real Grade Point Average (GPA), and propose as well an index for SET scores, the Real SET, to make inflated grades and inflated SET scores more visible. Used by institutions, parts of institutions or individual faculty, Real GPA and Real SET would encourage and protect faculty and students who offer or seek out educational experiences that have not been deflected by greed, sloth or cowardice.

The Influence of Political Orientation on Financial Risk Taking

We analyze the correlation between the political orientation of investors and their financial risk tolerance. Assessing financial risk tolerance is a very important aspect to developing an appropriate long‐term investing strategy. Our study is based on a sample of 129 undergraduates at Central Michigan University during one academic year. We employ a two‐axis political compass to determine the political orientation of our study participants. We determine their financial risk tolerance by analyzing their portfolios and trading behavior in a simulated investment game in a semester long course. We report two main findings: (1) financial risk tolerance is highest for those with more conservative economic political views and (2) financial risk tolerance is highest for those with more centrist social political views. We believe our results can help investment advisors and individual investors better assess individual financial risk tolerance through the use of the two‐axis political compass utilized in our study.

A Note on the Information Content of Standard & Poor's Common Stock Ranking Changes

This study examines the information content of Standard & Poors common stock ranking changes. Since prior studies find Standard & Poors common stock rankings provide investors with a measure of risk, a ranking change may signify a change in risk. Common stock ranking changes made by Standard & Poors may provide investors with a low-cost means of predicting the direction of future market risk. Internal memoranda containing ranking changes from June 1985 through May 1987 were obtained directly from Standard & Poors. Using a sample of 191 upgrades and 582 downgrades, results indicate that mean portfolio betas change following Standard & Poors memorandum dates for ranking changes.