Novel method to reveal true performance of US mutual funds

A highlight of this year's Annual Meeting was a presentation by Olivier Scaillet (pictured at the Meeting) on the application of false discovery rate (FDR) statistics to the estimation of mutual fund performance.

Scaillet uses FDR to reveal when good fund performance can be attributed to chance alone, and is therefore likely to deteriorate in the long term.

The Geneva-based faculty member of the SFI become interested in the application of FDR statistics to finance after attending a presentation by Berkeley statistician John Rice at a statistics conference in Brazil.

Though Rice applies the method to the detection of stellar occultations, Scaillet recognized the application to mutual fund selection when Rice stated:
We face the problem of searching for needles in a haystack when we do not know what the needles look like. How do we automate serendipity?

At this point on a Friday afternoon I am glad to entrust Scaillet to select the correct statistical test for this particular application.

The end result is that the private banking industry will benefit from an objective and relatively simple method to select wisely among the estimated 2100 US domestic mutual funds available to today's investor.

Forward look from Institute guest Professor Tom Cooley

What is the benefit of drawing upon academic research in the teaching of executive education? "Research is inherently forward looking and it is that inherent forward looking habit of mind that singles out a manager for success".

Dean Tom Cooley made these comments during a roadshow for the NYU Stern/Institute's new Executive MBA in Banking and Financial Institutions Management (EMBA), held today at Zurich's stylish Widder Hotel.

He and other representatives from the EMBA program Harry Hurzeler and Claudia Pfenniger offered answers to some pressing questions posed by the assembled graduate-level professionals in banking and finance.

"It is hard to imagine how someone can prepare to get to the next level in Management just by studying the way business is being done," said Professor Cooley. "If you do that alone you will always be backward looking".

Executive education programs that are embedded in strong research faculties, like the Swiss Finance Institute and NYU Stern School, enrich the conventional case study approach to business education with an academic basis that can better sustain a manager's career.

I will be reporting more from Professor Cooley and our other international guests in the coming weeks. For more information about the EMBA click here.

Third Annual Meeting assembles CEO's and top finance professors to reflect on solutions to financial instability

Tomorrow is the annual highlight in the Institute's knowledge transfer calendar with a day-long meeting that will assemble our faculty, invited academics from around the world, and special guests UBS Group CEO Marcel Rohner and NYU Dean Tom Cooley.

There's more information about the event here.

I will be reporting on the research presentations at the event shortly, including Professor Michael Brennan's presentation on agency and asset pricing, Olivier Scaillet's presentation on his work on false discoveries in US mutual fund manager performance and Amit Goyal's first major public presentation for the Institute since he took up his Senior Chair in August.

The image, above, shows Visiting Professor Darrell Duffie giving the plenary presentation at the Second Annual Meeting last year.

New challenges for Swiss market maker

As part of our regular Alumni Lunch meetings held at the elegant Zunfthaus to Saffran, the Institute had the honour of hearing a presentation by SIX Group CEO Urs Ruegsegger (pictured).

Dr Ruegsegger spoke about recent developments at SIX Group, the organization responsible for Switzerland’s financial market infrastructure. We will hold our Annual Meeting at the HQ of the SIX Group in Zurich next year.

Swiss Finance Institute Foundation Board member Philipp Halbherr was recently elected to the Board of Directors for the SIX Group AG, and I try to keep up to date with the Group's activities.

Reason and emotions in executive pay

Institute Director Jean-Pierre Danthine is presenting his research on executive compensation at the University of Amsterdam this afternoon. The research, performed jointly with John Donaldson of Columbia Business School, examines the "pay for luck" puzzle that is so much in the news these days.

Earlier, Swiss-based French-speaking press interviewed Professor Danthine about the work.