ALPHA THE ECONOMICS AND FINANCE NEWSLETTER

Volume III Issue IV

December 2010

MISSION STATEMENT In the world of modern finance, Alpha symbolizes excess portfolio return within the overall market.

Alpha is also the Greek alphabet equivalent to ―A‖, a letter in which academia symbolizes excellence and in-

tegrity. This newsletter should be viewed as a portfolio of financial and economic thoughts, which strives to

provide its readers with the highest return in terms of opinion, knowledge and thought. It also aims for aca-

demic excellence through its contributors, who represent top students, professors and business professionals.

An Interview with Provost

Willard Gingerich

Accessible and Affordable Education

While Still Providing the Highest

Standard

By: Sarah Horn

Dr.

Willard Gin-

gerich is the

Provost of

Montclair State

University. Dr.

Gingerich is a

former Fulbright

Scholar in

American Litera-

ture and he re-

ceived a B.A. in

English from the

State University

of New York at Buffalo. For his graduate degree Dr.

Gingerich studied indigenous culture in Mexico. He

received his doctorate in English from the University

of Connecticut. Before becoming the Provost for

Montclair State University in 2008 he served as an

English professor and Provost at other several uni-

versities.

Photo of Dr. Willard Gingerich

IN THIS ISSUE Page 1……….An Interview with Provost

Dr. Willard Gingerich

Page 2……….Interview for the Alpha Newsletter with

Vice Provost Theodosiou

Page 5……….Faculty Spotlight: Dr. A. Seddik

Meziani

Page 6……….Faculty Spotlight: Dr. Thomas Mayock

Page 7……….Forum on 2008 Financial Crisis

Page 8……...Work or Graduate School?

Page 10……..37th Annual NBEA Meeting: My

Experience as a Student Ambassador

Page 12……..Reading > Ratios

Page 14……..Meet Alpha Staff

Page 15……..Investor’s Corner: Fundamental Analysis

Page 17……..Acknowledgements, Feedback, Games

The Provost‘s office oversees all academic aspects

of the university including all the courses that are offered,

the faculty, the administration and registration process,

and grading. The Provost‘s mission is to advance the

institution in order to achieve a high level of academic

excellence, maintain the integrity of the academic

courses, assure that all of the...Continued on page 3.

Join the ALPHA Team

Alpha is currently looking for both highly motivated students and faculty members to write and contribute to the newsletter. Faculty members who are interested in con-tributing scholarly or opinionated articles on a current business topic are welcome. For more information or to apply for a position please contact either Stefan Genzor,

Editor in Chief or Dr. Susana Yu of the Economics and Finance Department.

Economics & Finance Department

Tutoring Schedule* - Spring 2010

Room PA 420

Mario Jarrett Dani Haddad Chris Quilici

FINANCE 321 ECON 102 - ECON

101

FINANCE

321/322/326

Monday 10:00 - 1:00 1:00 - 5:30 -

Tuesday 4:00 - 7:00 2:00 - 7:00 10:00 - 2:00

Wednesday 10:00 - 1:00 - 12:00 - 4:00

Thursday 12:00 - 3:00 3:30 - 6:00 10:00 - 2:00

Friday - - -

Tutoring is also provided by the Center for Academic Development and Assessment (CADA) at Morehead Hall

room 139-145. Call 973-655-4476/4364/5425 or visit www.montclair.edu/pages/cada For group tutoring please

call to make an appointment at 973-655-70371:

PAGE 2 Volume III Issue IV Alpha

Interview for the Alpha Newsletter with Associate Provost

Theodosiou

By: Sarah Horn

Dr. Constantine Theodosiou is the Dean of the Graduate School and also the Vice Provost for research at

Montclair State University. Dr. Theodosiou is a native Greek and received his Bachelor‘s degree in Physics and

Mathematics in Greece before coming to United States for his Master and Doctorate education. He received a

Master‘s degree and Doctorate from the University of Chicago in Atomic Physics. After this he spent a year at dif-

ferent universities followed by some time in Germany, a year at Drexel University, and time at the University of

Toledo. There he served as the associate Dean of the Natural Science and Mathematics department and later as the

interim dean of the graduate school. Besides this experience, Dr. Theodosiou also served as a professor at other

universities and has also won several prizes and grants for his research projects in science….Continued on page 4.

Continued from page 1.

students who receive degrees earn them, and that the

faculty assists students in the development of their ca-

reers.

The Provost‘s office works closely with the dif-

ferent schools and colleges within Montclair State

University in order to oversee the programs and to

develop new programs. The faculty develops these

programs, which are then approved by the Office of

the Provost. Finally they are presented to the state in

order to become official programs for the university.

One of Provost‘s biggest challenges is to ad-

vance the University and present the excellent educa-

tion that it offers to prospective students and other

universities. He also wants to further develop interna-

tional programs through the global education office. In

addition, the University is constantly working on new

projects for the future. One of the biggest is to develop

and later to promote fully online degree programs.

Montclair State University has many online courses

offered in every academic session, but there is no com-

pletely online degree program yet. The University and

Provost Gingerich are currently trying to develop the

first graduate degree online program at Montclair

State University. Provost could not provide full infor-

mation about the new programs since they are still in

the development stage, however, he explained that it

takes very careful research and observation in order to

develop an online degree program because not all ma-

jors can be converted into an online degree. Another

important project for the Provost is to develop an

overall strategic plan for the university. Each depart-

ment and each college has developed a strategic plan

and these different plans must be integrated into one

overall plan that works best for the entire university.

In addition to the academic side of the University pro-

grams, the Provost is also involved in strategic devel-

opment such as planning new construction projects,

planning for the capacity of classrooms and the num-

ber of faculty, along with matters like the technology

that will be employed. More projects are planned and

some of the construction work has already begun.

The whole University is working hard during

this economic recession in order to keep Montclair

State University at the current level and to strive for

greater growth. It is important to maintain revenues in

order to pay salaries and to provide the highest stan-

dard of education possible. Most of the revenue comes

from student tuition because the state provides less and

less support to educational institutions. But this is not

necessarily due to the recession; rather it has been a

trend over the past few years. The University strives to

provide accessibility along with affordability, however,

this is becoming more difficult as adequate funding is

harder to obtain. The term affordable is currently a big

challenge the university is facing. The tuition has to be

kept low at Montclair to make education accessible to

most students, yet, the University is still striving for

the best faculty they can hire and to create the best fa-

cilities. Another factor during the recession is that the

enrollment is going up because many students seek a

higher education degree due to the lack of jobs, to be

well prepared when the economy picks back up again.

According to a New York Times Article entitled

―College Enrollment Rate at Record High‖, ―more than

70% of the 2009 high school graduates attended college

last October‖. Many students choose this path in order

to be more competitive for their future career, but since

they are often financially constrained, they pursue an

education that offers academic excellence and afforda-

bility.

This leads into another topic relevant to Pro-

vost Gingerich‘s experience. He was once the Provost

of Fairleigh Dickinson University, which is a smaller,

private university in New Jersey. Private universities

used to face much more challenges in funding and fi-

nancing than a state institution, but this is no longer

the case. State institutions are facing hard times be-

cause of funding cuts, but they are still expected to be

accessible to anyone. Because of his experience at a pri-

vate university he is used to dealing with these chal-

lenges and he is prepared to keep up the mission of ex-

cellent education that Montclair State University has

offered for so many years.☺

PAGE 3 Volume III Issue IV Alpha

reviews the criteria of each applicant such as: the under-

graduate‘s GPA, test scores, relevant work experience,

letters of recommendation, and the letter written by the

student. The criteria vary for different programs. For

the MBA and M.A. business programs a score of 500 or

better is preferred, but the committee looks at all crite-

ria a prospective student presents. In some special cases

and often in education programs, interviews are con-

ducted in order to get to know the person and to ob-

serve their social skills. Work experience is always

beneficial and most of Montclair State University‘s stu-

dents are considered non-traditional

students, which means, they go to

school at night or return after a sig-

nificant amount of working years.

Dr. Theodosiou strongly rec-

ommends a graduate degree in order

to be competitive in today‘s market.

He does not fully agree with the

opinion that a graduate degree can

ease the pain of finding a job when

pursued right after the undergradu-

ate studies without work experience.

He believes that one should have a

clear focus on their interests before

pursuing a Master‘s degree. In most

cases it is easier to discover such in-

terests through work experience, to

see what the ―real‖ world is like and

also to gain practical experience on

top of the academic one. During the

four years of undergraduate educa-

tion a student builds an academic base in a field they

like and if they are not comfortable they can always

change their major. He also explains that there are stu-

dents who know exactly what they want and are com-

fortable in a Master‘s program without work experi-

ence. It also depends on the program. Dr. Theodosiou

explains how every department has its own rules and

regulations, which are overseen by the graduate office.

He believes a graduate education is very important in

order to be competitive in today‘s business world,

whether it is pursued with or without previous work

experience, but this decision is up to each individual. ☺

PAGE 4 Volume III Issue IV Alpha

Continued from page 2.

Dr. Theodosiou came to Montclair State Uni-

versity in 2009 as the Dean of the Graduate School, and

has revived the graduate school as an academic unit.

Montclair State University‘s graduate school offers 84

degree, certificate, or certification programs, which are

constantly revised in order to maintain their excellent

quality. Dr. Theodosiou and his team work closely with

the different departments in order to revise and create

new programs.

The number of the gradu-

ate school applicants in general

has increased since 2009 in large

part because of the economic crisis

and employees trying to brush up

their resumes with a graduate

education. Often current employ-

ees try to improve their market

value by adding the extra educa-

tion. In the end, the expense of

graduate school prevents many

students from pursuing advanced

degrees especially since many em-

ployers do not reimburse tuition.

Dr. Theodosiou spent many years

at the University of Toledo, where

the economy is more volatile than

on the East Coast. He can speak

from experience that when the

economy is in a recession many

people go back to school.

The overall application rate at Montclair State

University is 4.5% higher compared to last year, which

will most likely result in about 4,000 graduate students

enrolled in the spring of 2011. The graduate school at

Montclair State reports that the increase in students

was stronger this year even though the crisis was ex-

pected to hit the hardest last year. Therefore the in-

crease is not necessary due only to the economic crisis.

The number of continuing students has increased the

most as students are displaying their eagerness to finish

their degrees.

In order to get accepted into the Graduate

School at Montclair State University, graduate school

Photo of Dr. Constantine Theodisiou

Faculty Spotlight: Dr. A. Seddik Meziani

By: Andre A. Sigismondo

Dr. A. Seddik

Meziani is currently a

Professor in the Depart-

ment of Economics and

Finance at Montclair

State University. He be-

gan his education at the

University of Constan-

tine in Algeria and

received a bachelor

degree in management in 1975. He graduated from

New York University in 1980 with an MBA in Fi-

nance and International Business. He then completed

his doctoral degree in managerial economics from

Rensselaer Polytechnic Institute in 1985. He worked

at Standard & Poor‘s for a short time before he as-

sumed his teaching position at Montclair State Uni-

versity.

Dr. Meziani is a very active scholar who par-

ticipates in many conferences and symposiums. He is

an advisory board member for the Information Man-

agement Network (IMN). Many professional organiza-

tions contact him and seek his professional input on a

variety of issues. For example, he was interviewed by

Canada‘s Business News Network (BNN) and was the

key-note speaker at the Art of Indexing Summit in

2009. He also chaired presentations at the IMN‘s

World Series of Indexing ETFs in 2010 and at the Art

of Indexing Summit in 2010.

Throughout Dr. Meziani‘s career, he has al-

ways been involved in publishing research articles and

books related to exchange traded funds (ETFs). He

currently conducts research on less liquid benchmarks

and investigates their suitability for investment

portfolios. In addition, he studies U.S. micro cap stocks

and evaluates the frontier markets, which are a subset

of the emerging markets with lower market capitaliza-

tion and liquidity.

Dr. Meziani describes an ETF as a hybrid in-

strument that tracks a specific index. The main differ-

ence between that and the mutual fund is that the latter

is not consistently re-priced throughout the day. He

believes that an ETF is a better investment vehicle for

asset allocation strategies. He further claims that ETFs

can be powerful tools (in the right hands) and they

should not be placed in just any portfolio. He further

states that ETF should only be used by top profession-

als in the field. When asked about double and triple

ETF‘s, he argues that an increase in the number of

ETF‘s is good for diversification purpose in the finan-

cial markets. At the same time, he admits that there are

too many ETF‘s with similar characteristics.

Dr. Meziani‘s feels that graduate school can be

very important to locate a good job. However, he also

believes that students should have sufficient working

experience in the corporate world before they pursue a

graduate degree. He also advises students to be effec-

tive contributors in the classroom. When I asked him

about the CFA examination, he explained how he feels

that it is gradually turning into the equivalent of a CPA

for accountants. Dr. Meziani strongly encourages Fi-

nance majors to consider this certification. ☺

PAGE 5 Volume III Issue IV Alpha

Photo of Dr. A Seddik Meziani

Faculty Spotlight: Dr. Thomas Mayock

By: Andre A. Sigismondo

Dr. Thomas

Mayock is currently an

Assistant Professor in

the Department of Eco-

nomics and Finance at

Montclair State Univer-

sity. He received his BA

from Pennsylvania State

University in 2003 and

graduate with a doc-

toral degree in eco-

nomics from Florida State University in 2009. He de-

cided to pursue his graduate degree in economics during

his junior year in college. He teaches principles of micro-

economics and real estate economics at the undergradu-

ate level in Fall 2010.

Dr. Mayock is an active researcher, with exper-

tise in urban economics, labor economics, applied micro-

economics, and applied econometrics. His work has ap-

peared in highly regarded journals such as The Journal of

Urban Economics, Regional Science and Urban Economics,

Real Estate Economics, and The Journal of Housing Eco-

nomics. Like many other professors, Dr. Mayock attends

conferences regularly. Recently, he just returned from a

North American Regional Science conference in Denver.

He is also involved with many professional organiza-

tions such as the American Economics Association, NAR

Science Council, and American Real Estate Economics

Association.

When asked about his best article so far, Dr.

Mayock mentioned his latest published research entitled:

―Price Discrimination In Housing Markets.‖ Based on

the data collected in this paper, he found that there is a

lot of discrimination between white sellers and black

buyers. However, he did find that older people who

move to younger neighborhoods are making the dis-

crimination shrink as they are generally less preju-

diced and tend to positively affect the younger people.

Dr. Mayock is currently working on a project

entitled, ―Working on Housing and Labor Markets.‖

In this paper, he seeks to explain how different types

of housing affect location behavior. He also analyzes

what people who have longer commutes receive higher

salaries and bonuses.

Dr. Mayock offers his professional insights

about the overall real estate market. In particular, he

emphasizes that the condition of the real estate market

depends on the geographical areas. Many buyers be-

lieve many more foreclosures will occur. He feels that

there are high foreclosure rates in the bay areas, and

the California markets and dead bubble places in Las

Vegas and South Florida.

He explains that Cleveland is one of the most

affordable real estate markets in United States, yet it

also has one of the highest crime rates. When I asked

him about the unemployment rate, he said that in his

opinion underwater mortgages are keeping many peo-

ple out of work. He stated ―Many people cannot move

to find another job because they are stuck on their

mortgages and just do not have a large sum of cash on

hand‖. Overall, he suggests that it is not a perfect time

to buy a house unless the buyer finds a great deal. ☺

PAGE 6 Volume III Issue IV Alpha

Photo of Dr. A Thomas Mayock

PAGE 7 Volume III Issue IV Alpha

Forum on 2008 Financial Crisis

By: Parth Shah

Wednesday, November 10th, 2010 – The Finan-

cial Management and Economics Society (FMES), a

class II organization from The School of Business

(SBUS) at MSU, held a very informative and revealing

forum on the 2008 Financial collapse. The forum

brought together a very diverse group of participants

and audience members. The panel included three very

seasoned and savvy panelists from the world of Fi-

nance: Mr. James Cirenza of Olivetree USA, Mr. Wil-

liam Montgomery Cerf from Barclays Wealth, and Ms.

Deborah Perelmuter from the Federal Reserve Bank of

New York. All three panelists with decades of experi-

ence, tried to

make sense of

the collapse and

issues concern-

ing the financial

industry. Dean

Brent Chrite of

the School of

Business served

as moderator. In

addition, the au-

dience included

dozens of faculty

from the School

of Business,

members from

the four organi-

zations at SBUS

(The Accounting

Society, Epsilon Delta Epsilon, International Business

Society, and MSU Marketing Association), and a room

packed full of students.

The forum kicked off with an introduction from

the hosts Maulik Sardhara, President of FMES, and

Yisell Rodriguez, Vice-President of FMES. Maulik con-

cluded the introduction by briefing the audience with a

very simple, yet comprehensive overview on the finan-

cial collapse and the forum topic ―What‘s next‖? The

audience for the forum was very diverse, so it was up to

Dean Chrite to conduct the forum at a level where it

was challenging yet understandable for more than

150 students and staff in the audience. After talking

to more than a dozen student peers who attended the

forum, I can say it with certainty that the discussion

was comprehensive and informative.

The first half of the discussion focused on the

financial sectors its contribution to the recession. One

of the very hot topics regarding the future of the fi-

nancial industry is the role of regulatory agencies.

The failure of the regulatory agencies is considered

one of the primary reasons behind the collapse. The

consensus among the panelists was that these agen-

cies failed to protect the consumers. All three panel-

ists candidly stressed their annoyance and frustration

with regulatory incompetence. Mr. Cerf nicely sum-

marized the issue of

incompetent agen-

cies by pointing out

the conflict of inter-

ests that exist be-

tween agencies

such as Moody‘s (a

private rating

agency) and the

corporations whose

bonds they rate.

Then, the

discussion turned

to the economy as a

whole. For exam-

ple, the very con-

troversial issue on

the upcoming sec-

ond round of quan-

titative easing (QE II) became a central topic in the

second half of the forum. Obviously the presence of

Ms. Deborah Perelmuter, the Vice President of Fed-

eral Reserve Bank of New York, made the topic all

that more interesting. Mr. Cirenza, with his decades

worth of experience in international finance and a

very impressive knowledge on China, presented di-

vergent opinions. And Mr. Cerf explored the many

different impacts that QE II could have on economy

as a whole. Continued on page 8.

Continued from page 7.

The topic was very entertaining and brought

forth many different opinions. One of the audience

members (Dr. Zaman Zamanian) offered his comments

on the Federal Reserve and concluded by questioning

―whether the Federal Reserve should be abolished?‖

Yes, that‘s right, ―should we abolish the Federal Re-

serve?‖ Mr. Cerf courteously responded by explaining

the major role the Federal Reserve plays in the stabil-

ity of an economy, not just in America but in all devel-

oped economies.

In addition, the forum also included questions

from the members of four organizations from the

School of Business. One of the questions that really

concerned the students was ―What‘s next in Finance?‖

All three panelists gave their outlook on the future job

markets and their opinion of what is required from em-

ployers. They stressed the importance of communica-

tion skills and the ability to convey one‘s competences

in the work force. Mr Cerf explained, ―most times, em-

ployers assume that you know nothing pertaining to

the job in question, rather, they are interviewing you

to gauge your communication skills and ability.‖ Stu-

dents from the School of Business can use such infor-

mation to make themselves appealing to future em-

ployers.

In the end, the forum was concluded by the

hosts with a speech of acknowledgment and thanks.

Since the forum was such a success, it is only fair that

the people who organized the forum be acknowledged.

A lot of credit goes to Dr. Susana Yu and Ms. Maria

Torres, the advisors of FMES. In addition, the forum

was made possible by the FMES E-Board and the stu-

dent ambassadors who assisted in the event. ☺

Work or Graduate School?

By: Stefan Genzor

After four years of studying hard, or enjoying

college, students often find themselves at a crossroads.

After earning a bachelor‘s degree, you must decide

what to do next. Should you find a job and earn back

some of the money spent on college? Should you make

your first attempts to succeed in the field that college

education has hopefully prepared you for? To some

people going straight to graduate school is the best

option, for others it is not. Whatever the case, you

should decide based on your financial situation, career

goals, and the field that you studied. You have three

general options: go straight to graduate school, work

in the your field of interest for a few years and go back

to school afterwards, or start a career in your desired

field and forget about graduate school. What should

you do?

If you decide to go to graduate school right af-

ter your undergraduate degree you will not be alone,

as many students in today‘s weakened economy are

choosing that as their first option. There are some ar-

eas of study that almost require you to continue your

studies at the graduate level. These include subjects

that are more theoretical or esoteric such as philoso-

phy, physics, or astronomy. Those planning on becom-

ing medical doctors must also continue at the graduate

level, as taking a break from school can prove detri-

mental. For example, my brother Pavol Genzor is cur-

rently in the third year of a PhD program for Micro

Biology studying at John Hopkins University in Balti-

more. His program is geared towards research and if

he had taken a break from school, it would probably do

more harm than good in his situation. When I asked

him how he feels about being in graduate school given

that he did not take a break from work, he said that ‗‘I

am happy about being in graduate school. Even

though the pay is not very...‖Continued on page…..9

PAGE 8 Volume III Issue IV Alpha

Continued from page 8.

―good and it is definitely not reflecting the amount of

work I do, I do like what I am doing. If I wanted

money, I would have gone somewhere else, maybe to

be a doctor or a business man.‘‘ Now he is in a doctoral

program receiving a stipend and free tuition for being

a teaching assistant. In general this would not apply to

Masters degree programs as scholarships are very lim-

ited. He said that the best thing about graduate school

is that ‗you are your own boss. If you are a self-

sufficient thinker and can manage your time, graduate

school will be a great experience. The pay will not be

much and the amount of work that is required will also

be very high, but aside from that, graduate school is

the place to be.‘‘

Alternatively you can work for couple of years

and then return to school. Although it might not be

easy to get a good job after graduation, going straight

to graduate school is probably not a good idea for the

majority of people. It would be preferable to work in

the field you studied; however, any real job experience

will be beneficial. Many people are not very sure what

exactly they want to do once they graduate and work-

ing in any field will certainly help. Whether you al-

ready know what you want to do, you are somewhat

sure, or you are still looking for your career calling,

any work experience will be beneficial. However, many

people have jobs that they do not really like or enjoy

which affects their personal lives and the people

around them. For example, another friend of mine

Brook Chernet, is studying Micro Biology at Tufts

University in Boston. He too went to a PhD program

right after graduating. When I asked him how he feels

about being in graduate school he said ‗‘It‘s alright.

The future is too unpredictable. I don‘t know if I will

have a job when I get my PhD and on top of that these

programs are designed to train people to be college

professors. I don‘t really want to do that. I want to do

more management and business.‘‘ He has been in the

program for the past three years and has received his

Masters degree last year, however, he is seriously

thinking about leaving the program and starting an

MBA instead.

He says that there are many positives such as

learning how to think critically, or being able to work

more closely with the professors. You will no longer

be one of twenty, fifty or hundred students in the class.

Nevertheless, there are many things that make it much

harder. He says ‗‘Research is very hard. If it fails, you

have to find something new to work on. The faculty

also asks too much of the students, and the amount of

work we have to put in is like having two full time

jobs.‘‘ To him, money is really not a problem, but it is

easy to tell that he is not happy with the current pro-

gram and will probably end up going into an MBA

program. I believe he would have been better off work-

ing for a year or two before going to graduate school.

This only shows why taking a break before graduate

school is beneficial. Additionally, one of the biggest

benefits is the possibility of finding an employer that

will compensate your graduate school fees. This is es-

pecially true if the field of study is directly related to

the business you are in. In most cases the employer

will require you to work for them for a certain period

in order to get a return on their investment. Nonethe-

less this can save you a significant amount of money as

graduate school can be very expensive, especially for

MBA degrees.

Alternatively you could go to work and never

go back to school. This might not sound like one of the

better options, however, for some careers, graduate

school will not enhance your job prospects or improve

your future earnings potential. Some fields simply re-

quire work experience. There are many famous people

that never received a graduate degree or even a college

degree like Henry Ford, Bill Gates, Michael Dell, An-

drew Jackson, Steven Spielberg, or Mark Zuckerberg.

They all had a vision of what they wanted to accom-

plish and more school probably would not help them

in achieving their goals. The bottom line is that it all

depends on the individual. If you did not do well in

college and were always ready to go to work, school is

probably not meant for you and you will be better off

going straight to work.

Keep in mind that pursuing a graduate degree

is a major commitment of time and money; a decision

not to take lightly. You will face several years of in-

tense work and research …Continued on page 10.

PAGE 9 Volume III Issue IV Alpha

Continued from page 9.

research and a much more demanding course load. Be-

fore you decide to proceed to graduate school you

should honestly answer some questions for yourself.

Why are you considering going to graduate school?

Do you have a clear understanding of your career

goals? If yes, is graduate school really going to help

you reach those goals? If you have any doubts about

your professional goals, consider putting off graduate

school and instead spend some time working on some

self-assessment and career planning. If you go to

graduate school without a clear goal, you will probably

end up wasting both time and money. ☺

References:

http://www.quintcareers.com/considering_graduate_school.html

http://www.gradschools.com/article-detail/pre-grad-break-74

The second morning of the event, which was

held at the Hyatt Regency Hotel in Morristown NJ, my

fellow Student Ambassadors and I arrived at sunrise.

After assisting in preparing the event format and re-

ceiving a one-on-one demonstration of the Bloomberg

Terminal from a Bloomberg Associate, the influx of at-

tendees began. Professionals from KPMG, Barclays,

Federal Reserve Bank of New York, Morgan Stanley,

Standard and Poor‘s, and various other esteemed firms

arrived along with professors and experts representing

universities such as Penn State, Rochester, Syracuse,

University of Paris, Baruch College, State University of

New York, New York Institute of Technology, Mont-

clair State University, and dozens more. At that point I

realized that this would be more insightful and valuable

than I had anticipated. Of course, my prime purpose

was to be of assistance to the attendees and help admin-

ister the program, which was an experience in and of

itself. As the Student Ambassadors, we had the respon-

sibility of prompting sessions that were delegated to us

and being of assistance to any of the guests or speakers.

During the sessions I assisted, I gained unique insights.

Issues in Corporate Governance

The first session that I assisted was titled ―Issues in Corporate Governance.” For me, the context was unfa-miliar, as about a dozen or more professors and busi-ness people waited nonchalantly to begin the event. Af-ter I had introduced myself and set up the presentations for the speakers, we were underway.

The theme explored a number of independent research findings associated with issues in corporate governance, from... Continued on page 11.

37th Annual NBEA Meeting: My

Experience as a Student Ambassador

By: Matt Cartagena

At MSU, there are a number of ―perks‖ for

the School of Business students. As a student, you can attend various events hosted by career services such as career fairs, mock interviews, or you can join an organi-zation such as the Financial Management and Econom-ics Society (FMES) which offers a number of events including presentations from practitioners and trips to locations like the Federal Reserve. Such opportunities are usually heavily advertised. However, from time-to-time, there are opportunities at our School of Business that offer invaluable practical exposure to an integrated atmosphere of professional business and academia. For instance the 37th Annual Northeast Business and Eco-nomics Association (NBEA) Meeting which was hosted by the MSU School of Business from September, 30th to October 2nd, 2010. It was a forum for practitioners and academics of all disciplines to present, discuss, and de-bate business topics in their areas of expertise. It only took me five minutes to sift through the official event program to understand the value of this event, so I vol-unteered as a Student Ambassador.

PAGE 10 Volume III Issue IV Alpha

Photo of Dr. Phillip LeBel

Continued from page 10.

the ―Executive Compensation of Family Owned Firms‖ by Elena Smirnova of SUNY to ―Director Affiliations and Acquisition Announcement Performance‖ by Chia-Wei Chen of Tunghai University. The speakers pro-vided evidence that there are statistical relationships in the corporate function that speak to the power of incen-tives and to the perception of what is better for a corpo-ration.

Elena Smirnova explored the alignment of in-centives between family owned firms (where executives are founders or descendants of founders with high lev-els of stock ownership) and non-family owned firms. Through econometric computations she argued that family owned firms have a better alignment of incen-tives. Her findings were that ―higher operating income leads to a higher CEO compensation in family owned firms,‖ whereas ―return on assets and dividend policy were stronger de-terminants of CEO compensation for non-family owned firm.‖ In conclu-sion, ―non-family‖ CEOs appeared to be more inclined to work harder to in-crease ROA and dividends as a method for com-pensation versus the more non-illusionary growth method of increas-ing operating in-come. Chia-Wei Chen presented the findings of a less obvious correlation. When examining companies whose CEO also serves on the Board of Di-rectors in another firm, higher cumulative abnormal returns were achieved after acquisition announcements than compared to a company who was lead by a CEO without a directorship in another firm. What did I take from all of this ? It was confirmed to me that there is an obvious inclination in human nature to act and react according to what is best for you—especially in the cor-porate environment. More importantly, what I took from this was an exposure to unique business perspec-tive and empirical conclusions that I can place in my ―back pocket.‖

After my first session on “Issues in Corporate Governance,” a much needed lunch was ready for all of the attendees and guests. Of course the food was memo-rable , but the Keynote Speaker, Michael Szenberg, Pro-fessor of Economics at Pace University, delivered a speech that captured everyone‘s attention. Surprisingly, it was not focused on business, corporations, or even the economy—it was more important that that. He spoke about pedagogical philosophy and about being a learner. After this lunch, I was able to walk away full of food and with a handful of powerful maxims that Dr. Szenberg cheerfully presented to his audience.

Issues in Investment—Market Returns

The second session I assisted in was focused around the theme of “Market Returns.” This theme was general, meaning the research topics presented were all different, yet very insightful. The most memorable, for

me, were the papers by our very own pro-fessors from MSU: Dr. Sed-dik Meziani and Dr. Farahmand Rezvani. Per-haps it is be-cause I have a interest in the matters they discussed, but it surely opened my mind to cor-ners of finance that are not so actively taught in undergradu-ate coursework.

Dr. Meziani, a Pro-

fessor of Finance, presented his paper “Seeking Alpha beyond Small Cap Markets: The Risk and Return Dynamics of Micro-Cap Stocks.” To be concise, he showed that Micro-cap stocks should not be compared with Small Cap stocks based on the more favorable risk adjusted return characteristics over the past decade and the more favorable correlation to other stock categories. In his conclusion, he stressed that there is a gap in academic research regarding Mi-cro-cap stocks playing a role as their own asset class category. Continued on page 12.

PAGE 11 Volume III Issue IV Alpha

Photo of SBUS Faculty at luncheon

Continued from page 11.

My Takeaways Attending this event gave me some important insights. I gained a rough idea on some of the issues surrounding corporate governance, insight on a stock category that I had not previously studied in depth, and even other subject matters such as the possible switch from GAAP accounting standards to IFRS accounting standards, the relationship between stock option expi-ration and stock movement, and the econometric inves-tigation of the petroleum co-movement with the U.S dollar. Most importantly however, I took with me an understanding that there is much more to being a stu-dent of business than simply studying the subject mat-ter. Exposure to this event contributed to the holistic business experience that I have been seeking while at Montclair. Being witness to the methodologies of aca-demic researchers and the opinions of seasoned profes-sionals acts as a tool for future reference and as a stimu-lus to think deeper than what is obvious. It was a pleas-ure to volunteer for this event, and it is a lesson that opportunities are available if you search for and absorb them . What would I like the MSU Students to take from my story? There is much more to the School of Business than attending class Monday through Friday and acing tests. Opportunities exist that may not be thrown at you or advertised. When you take the initia-tive and pursue opportunities, perhaps you will experi-ence something as valuable or more valuable than what

the NBEA Meeting was for me. ☺ References:

Smirnova, Elena. "Executive Compensation of Family-Owned Firms." Northeast Business & Economics Association (2010): 372.

theoretical factors on investing are to often ignored.

While the emphasis on ―ratios‖ is important; emphasis

on ―reading‖ is just as important if not more.

―Before reaching high school, I had read almost

every book available on investing in public library,‖

said Warren Buffett when asked about the reasons be-

hind his success in a 2007 forum. So, arguably the most

successful investor of the 20th century admits reading

on investing as the very foundation of his success. Do

not be discouraged if you are in college and can not

name a dozen books on finance/investing. Obviously

you have a lot of ground to cover to be Buffett; but few

can hope to be Buffett. The Investing Icon himself

stresses the importance of ―reading‖ in contrast to

―ratios‖. Buffett has given many talks on how reading

is the most important tool he uses. Buffet said ―I read

four national news-papers a day (NYT, WSJ…), read

financial statements, annual reports, quarterly state-

ments, etc.‖ when asked what he does all day in a CBS

interview.

While Buffett‘s success exemplifies the impor-

tance of reading in finance; another example shows the

problems of trying to exploit the quantitative elements

in finance. If you were one of 11 million people who

watched October 11, 2010‘s ―60 Minutes‖ episode, the

very discouraging story..Continued on page 13.

PAGE 12 Volume III Issue IV Alpha

READING > RATIOS

By: Parth Shah

Many of us studying finance/economics are

equipping ourselves to out-analyze and out-think tens

of thousands of investors involved in finance. The field

of Finance just like almost every other field of business,

has quantitative as well as qualitative/theoretical ele-

ments. Quantitative elements such as all the ratios and

formulas are thought to be of the utmost importance by

most of us students as well as many in academia and

businesses themselves. Most of us are actually meas-

ured based on how well we do in the quantitative part

of finance because, it is easy and convenient to measure.

While the technical factors get so much attention,

Continued from page 12.

on ―The Speed Traders‖. Perhaps you didn‘t; and in

that case, ―The Speed Traders‖ is about how computer

and programming wizards have created millions of fi-

nancial functions that automatically buy and sell based

on information received by these super-computers. In

addition, these super-computers account for about 70

percent of the trading in the market. They have the

ability to incorporate the quantitative information on

stock(s) and trade in micro-second. They eliminate the

human element of investing. We are too SLOW when

it comes to responding to quantitative information.

In the opinions of many, these ―speed traders‖

suck all the small profits out of the stock market. Thus,

individual or small time investor can not make money

in short-term investing based on quantitative informa-

tion. Again, don not be discouraged or frightened by

these super-computers. As the 60 Minutes‘ story sug-

gested; they can only incorporate the information that

can be converted into a function; and hence, informa-

tion that can be put into numerical values.

So, although these super-computers can master

in quantitative elements; they are handicapped when it

comes to reading qualitative information; at least for

now. The functions are not sophisticated enough to

incorporate the ability of a management. They are not

able enough to numerically incorporate the historical

and future trends of a particular industry. Maybe a

function can project the future of the commodity mar-

ket; however, they are only as good as the precise un-

derstanding the creator of the function has on the spe-

cific commodity. Investors who discipline themselves to

read business publications and annual reports can gain

an edge in the market. However, it is important to focus

on the ins and outs of financial reports and on the un-

derstanding of the industry(s) in which the company(s)

operate.

Carl Icahn, another legendary investor, has been

successful largely due to his expertise in the qualitative

factors that go into investing. Again, we can not be-

come Icahn, but we can learn from him about the im-

portance of gaining an edge by gathering knowledge on

the industry(s) or stock(s). Or George Soros, an Inter-

national investing ―guru‖, who has been successful by

acquiring an in-depth understanding in international

finance.

I, like many of you, realize that Buffett, Icahn,

and Soros are all men from different age of investing

and perhaps what worked for them cannot really work

today. In that case, let‘s look at a very successful inves-

tor who gained everyone‘s respect by forecasting the

2008 collapse; and therefore, ended up making a lot of

money. The investor is Dr. Michael Burry, and I

learned about him from reading Michael Lewis‘s recent

best-seller ―The Big Short‖. Dr. Michael Burry is not a

PhD in finance or economics; he is a medical doctor.

Without getting involved in too much detail, Michael

Burry let his curiosity in the field of Finance wonder

and educated himself. Burry proclaims that he started

out by reading about successful investors, hedge fund

managers, educated himself on different industries, edu-

cated himself on how to read financial statements, and

etc. He never even took a finance class. But, he made

himself aware by reading and reading a lot. As the

book ―The Big short‖ shows, when everyone was fo-

cused on ratios on subprime mortgages; Burry went out

of his way to read and skim over the actual reports on

these sub-prime mortgages.

Michael Lewis, the very successful author of

―The Big Short‖ and more than half a dozen other best

sellers said, ―majority of the people in Wall Street lack

the basic understanding of what they are doing,‖ in his

interview with Bloomberg TV. Continued on page 14.

PAGE 13 Volume III Issue IV Alpha

Continued from page 13.

One can disagree with Lewis, and many do. However,

Lewis‘s first bestseller ―Liar‘s Poker‖ is essentially on

how ridiculous the field of finance is. ―Liar‘s Poker‖ was

written in the late 1980s, but its lessons seem to hold

true in 2008; it‘s hard to call Lewis a ―Monday morning

Quarter Back‖.

Buffet, Lewis and many experts in finance be-

lieve that future employers will demand better under-

standing of value investing as it regains its importance.

That‘s how it was done when old pros like Buffett did it

and that‘s how it‘ll come back to. As Peter Lynch, a

great author and Financier say, ―Know what you own;

and be able to explain that company‘s prospects to a ten

year old in less than two minutes.‖

Some of the many great daily and weekly publi-

cations related to Finance:

Wall Street Journal

New York Times

USA Today

Entrepreneur

Business Week

Financial Times

Harvard Business Review

Some of the many great books and authors re-

lated to Finance:

Michael Lewis: ―Liar’s Poker‖, ―The Big Short‖,

and others. Possibly the most exciting author on fi-

nance and considered to have one of the most well-done

research in his books.

Benjamin Graham‘s ―The Intelligent Investor‖ Ben

Graham‘s book is considered the bible on investing and

a must for all.

Peter Lynch: ―One Up on Wall Street‖, ―Beating

the Street‖. Lynch isn‘t just an author but a great Finan-

cier himself.

―Buffett, The Making of an American Capitalist‖ by Roger

Lowenstein. Possibly the best biography of Buffett.

―Money Masters of Our Time‖ by John Train. Pro-

files more than dozen of the greatest money managers.☺

PAGE 14 Volume III Issue IV Alpha

ALPHA Staff

Editor in Chief

Stefan Genzor

stefan.genzor@gmail.com

Assistant Editor

Matt Cartagena

cartagenam4@gmail.com

Contributing Writers

Andre Sigismondo

sigismondoa1@mail.

montclair.edu

Parth Shah

shahp071@gmail.com

Sarah Horn

INVESTOR‘S CORNER

FUNDAMENTAL ANALYSIS By: Stefan Genzor

What Does Fundamental Analysis Mean?

It is a method of evaluating a security that en-

tails attempting to measure its intrinsic value by exam-

ining related economic, financial and other qualitative

and quantitative factors. Fundamental analysts study

everything that can affect the security's value, including

macroeconomic factors (like the overall economy and

industry conditions) and company-specific factors (like

financial condition and management).

Here are some key metrics that can be used in

fundamental analysis to evaluate securities:

I. Price-to-Earnings Ratio

(also known as the P/E ratio or earnings multiple) .

The P/E ratio divides stock price by the firm‘s earnings

per share. This represents

how much investors are will-

ing to pay for each dollar of

a company's earnings.

The P/E ratio is im-

portant because it provides a

measuring stick to compare

valuations across companies.

A stock with a lower P/E

ratio costs less per share for

the same level of financial

performance than one with a

higher P/E. What that es-

sentially means is that low

P/E is the way to go when

comparing stocks of compa-

nies in the same industry, but not as valuable when you

do comparisons across different industries. While it's

completely reasonable to see a telecom stock with a P/

E in the low teens, a P/E closer to 40 is not out of the

line for a high-tech stock. As long as you're comparing

apples to apples, the P/E ratio can give you an excel-

lent glimpse at a stock's valuation.

II. Price-to-Book Ratio

The P/E ratio indicates what investors are pay-

ing for each dollar of a company's earnings, the price-to

-book ratio (or P/B ratio) is a measure of what they are

paying for each dollar of a company's assets. The P/B

ratio divides a stock's share price by its net assets, less

any intangibles such as goodwill.

Removing intangibles is an important element

of the price-to-book ratio. It means that the P/B ratio

indicates what investors are paying for real-world tan-

gible assets, not the Harder-to-value intangibles. As

such, the P/B is a relatively conservative metric.

That is not to say that the P/B ratio is not with-

out limitations - for companies that have significant in-

tangibles, the price-to-book ratio can be misleadingly

high. For most stocks, however, shooting for a P/B of

1.5 or less is a good way of finding value stocks.

III. Debt-Equity

Knowing how

a company finances its

assets is essential for

any investor – espe-

cially if you are on the

prowl for the next big

value stock. That is

where this ratio comes

in. The debt/equity

ratio indicates what

proportion of financ-

ing a company re-

ceives from debt (like

loans or bonds) and equity (like the issuance of shares

of stock), can vary from industry to industry.

Beware of firms with debt/equity numbers

higher than other firms in their industry, especially

when an industry is facing tough times – it could be one

of your first signs that a company is getting over its

head in debt. Continued on page 16.

PAGE 15 Volume III Issue IV Alpha

INVESTOR‘S CORNER

FUNDAMENTAL ANALYSIS CONTINUED Continued from page 15.

IV. Free Cash Flow

Many investors don not realize that, a com-

pany's earnings almost never equal the amount of cash

it brings in. That is because companies report their fi-

nancials using GAAP or IFRS accounting principles,

not the balance of the corporate checking account. So

while a company could be reporting a huge profit for

their latest quarter, the corporate coffers could be bare.

Free cash flow solves this problem. It tells an

investor how much actual cash a company is left with

after any capital investments. Generally speaking, it is a

good idea to look for firms with positive free cash flow,

and as with the debt-equity ratio, when times are

tough, this metric is all the more significant.

V. PEG Ratio

The price/earnings to growth ratio (or PEG

Ratio), is a modified version of the P/E ratio that also

takes earnings growth into account. Looking for stocks

based on their PEG ratio can be a good way to find

companies that are undervalued but growing, and could

be gaining attention in coming quarters. Like the P/E

ratio, this metric varies from industry to industry.

VI. Dividend Yield

A financial ratio that shows how much a com-

pany pays out in dividends each year relative to its

share price. In the absence of any capital gains, the divi-

dend yield is the return on investment for a stock. Divi-

dend yield is calculated as: Annual Dividends Per

Share/Price Per Share.

Dividend yield is a way to measure how much

cash flow you are getting for each dollar invested in an

equity position - in other words, how much "bang for

your buck" you are getting from dividends. Investors

who require a minimum stream of cash flow from their

investment portfolio can secure this cash flow by in-

vesting in stocks paying relatively high, stable dividend

yields.

VII. Enterprise Multiple

A ratio used to determine the value of a com-

pany. The enterprise multiple looks at a firm as a po-

tential acquirer would, because it takes debt into ac-

count - an item which other multiples like the P/E ratio

do not include. Enterprise multiple is calculated as: En-

terprise Value/EBITDA. A low ratio indicates that a

company might be undervalued. The enterprise multi-

ple is used for several reasons:

1) It is useful for transnational comparisons because it

ignores the distorting effects of individual countries'

taxation policies.

2) It is used to find attractive takeover candidates.

Enterprise value is a better metric than market

cap for takeovers. It takes into account the debt which

the acquirer will have to assume. Therefore, a company

with a low enterprise multiple can be viewed as a good

takeover candidate.

Again, enterprise multiples can vary depending

on the industry. Therefore, it's important to compare

the multiple to other companies or to the industry in

general. Expect higher enterprise multiples in high

growth industries (like biotech) and lower multiples in

industries with slow growth (like railways).

VIII. Economic Value Added – EVA

A measure of a company's financial perform-

ance based on the residual wealth calculated

by deducting cost of capital from its operating profit

(adjusted for taxes on a cash basis). (Also referred to as

"economic profit".)

The formula for calculating EVA is as follows:

= Net Operating Profit After Taxes (NOPAT) -

(Capital * Cost of Capital)

If you are interested to learn more visit:

http://www.investopedia.com ☺

PAGE 16 Volume III Issue IV Alpha

ACKNOWLEDGEMENTS

We would like to thank Dr. Richard Lord for taking his time to read all of the articles and providing editing rec-

ommendations.

We would also like to thank Dr. Susana Yu for her organizational and motivational support that made this edition

of Alpha Newsletter possible.

PAGE 17 Volume III Issue IV Alpha

FEEDBACK

Please complete a quick survey by typing the link below to your internet browser and pro-

vide us with any feedback and/or recommendations on how we could improve Alpha newsletter.

http://www.surveymonkey.com/s/WSLRS3H

Holiday Party

Come and enjoy the

multicultural food

Relax and have fun before

finals

Interact/Network with

others

AND

MSU MARKETING ASSOCIATION

MSU MARKETING ASSOCIATION IS A CLASS III ORGANIZATION OF THE MSU SGA

CO-SPONSORED BY

FINANNCIAL MANAGEMENT AND ECONOMIC SOCIETY FMES IS A CLASS II ORGANIZATION OF THE MSU SGA

FMES

Date: Wednesday, December 8th, 2010

Location: Russ Hall Kops Lounge

Time: 3:00PM-5:00PM