Advances in
Financial Education

#1 - A Survey Of Student Managed Funds

Walter P. Neely and Philip L. Cooley

"Are you the sage on the stage or the guide on the side?" That old question captures a significant difference between teaching traditional finance courses and "teaching" a student managed fund (SMF) course. A student managed fund offers students the opportunity to invest real money, which tends to focus the mind more than simulated investments can ever do. Reported here are the results of a nationwide survey of SMF programs, including the names of colleges and universities offering such programs, the sources of funding, and several aspects of operating SMFs. Useful benchmarks are provided for those contemplating the establishment of an SMF.

Pages 1-9

#2 - Understanding The Impact Of Financial Decision On Financial Statements

Tom Arnold, LeRoy D. Brooks and Terry D. Nixon

Viable financial planning requires financial managers' understanding of the consequences of impending decisions on their company’s financial performance and position. Understanding the impact of prior decisions on their financial statements also enables future decisions aimed at improving their shareholders' wealth. This note intends to contribute to developing this capacity in finance students. We provide a presentation format directly connecting financial decisions to financial statement impacts. Bridging material covered in accounting courses and a finance student's needs as a possible future manager or analyst, this classroom pedagogy supplements and reinforces the objectives of the financial planning component of a finance course.

Pages 10-21

#3 - Web Usage In Financial Education

Stuart Michelson and Stanley D. Smith

In this article we present the results of a technology survey that provides information on the use of web pages for teaching and learning in finance. We also provide These results are compared with selected results from three two additional comprehensive surveys on the use of technology in education. We discuss the need for a course web page in education and suggest ways web pages can be used to benefit students. This information provides evidence on the increasing use of web pages in education and demonstrates how faculty can provide valuable and timely information and materials for students.

Pages 22-33

#4 - Student Perceptions Of Introductory Business Finance
Accounting And Finance Versus Other Business Majors

Balasingham Balachandran and Michael Skully

This paper examines differences in student perceptions about the contents and other aspects (challenging, interesting, usefulness and difficulty) of an introductory finance course between two sub groups in Australia: students with accounting and finance majors (AFM) and those with other business majors (OBM). The research suggests that AFM students are interested in studying a "challenging" introductory finance course whereas OBM students perceived that introductory finance is "difficult" and "challenging." That is, AFM students’ perception of "challenging" is driven by variables related to "usefulness" and "interesting" while OBM was related to "difficulty." The two groups similarly held quite different perceptions about the topics covered. The findings suggest that AFM and OBM students might be better served by providing each group with a somewhat different course.

Pages 34-51

#5 - Teaching Methods And Assessment Techniques For The Undergraduate Course:
A Canadian Survey

Nauman Farooqi and Kent T. Saunders

This paper examines the results of a national survey of teaching methods and assessment techniques for the undergraduate introductory finance course at Canadian universities. This study builds on work done by Dr. Kent Saunders [2001, 2002] in the United States (U.S.) in this area, using his questionnaire with minor modifications and additions. Of the 373 surveys sent out, 79 were returned for a 21% response rate. The survey results indicate that the dominant teaching methods in Canada include writing on the board lectures, overhead projector lectures, and instructor led problem solving. The primary out-of-class assignment is textbook reading. Students' overall grade is primarily determined by in-class exams. The overall response patterns in Canada are similar to the response patterns in the U.S. The main difference in the response patterns between the two countries is that Canadian faculty use more group work as an in-class teaching method and as an out-of-class assignment relative to their U.S. counterparts. This result appears in terms of computer work, writing assignments and presentations.

Pages 52-56

#6 - A Re-examination Of Miller's Gain From Leverage With Personal Taxes

Robert L. Welch and Bob Hanrahan

Miller’s "Debt and Taxes" (1977) article determines the value of the levered firm in the presence of personal taxes on debt and equity income and explicitly states the gain from leverage (tax shield) for the perpetuity scenario. In pursuing the development of this result many modern corporate finance textbooks use after personal tax discount rates to capitalize the perpetual cash flows of bond and/or equity income to calculate market values. This paper demonstrates the contradictions and nonsensical results that can occur by using these after tax discount rates and moreover, shows that before tax capitalization rates avoid these problems. The analysis focuses on the change in the market value of debt, equity and tax shields between the three tax scenarios of no tax, corporate tax and personal tax. Lastly, several expressions for the cost of levered equity and the weighted average cost of capital in the presence of personal taxes are presented and shown to be consistent with the before tax discount rates. In particular, an expression for the cost of levered equity that is independent of all taxes is developed and hence remains constant for all three tax scenarios. These results yield a more complete understanding of the connection between Miller’s paper and his earlier work with Modigliani. This allows students a more comprehensive and internally consistent view of this static theory of capital structure.

Pages 57-76

# 7 - Teaching What We Know About Asset Allocation

Manuel Tarrazo and L. William Murray

We first review some models that could be used to teach quantitative asset allocation and then we discuss methodological issues. We show that mean-variance optimization breaks down for a two-security, typical textbook case because it fails to include variance-covariance effects. It is better to characterize asset allocation as a three-security (a money market, a bond fund, and a stock fund) mean-variance optimization problem, with money as a non-stochastic variable. Ending a general investments course with asset allocation, instead of derivatives, leads to very practical issues such as mutual funds, individual investing, and cash flow-based analysis of alternative investment strategies.

Pages 77-103

#8 - Finance Conference Awards And The Quality Of Publications

Yoon K. Choi and Stanley L. Smith

This analysis supports the idea that finance association meeting awards do have informational content with respect to those papers being published in the future. For the 1994-1999 period, the percent of award papers being published varied from 64 to 74 percent with the Financial Management Association (FMA) at the top. For the same period, the percent of award papers being published in premier journals (JB, JF, JFEC, JFQA, RFS) varied from 0 to 40 percent with the FMA and the Southern Finance Association (SFA) tied at the top. For the 1994-1998 period, the SFA had the highest publication percentage.

Pages 104-111