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Lesson from Leeson and Other Investment Follies (March 1995)

As 1994 opened with U.S. bond yields at long-time lows, many investors reaching for higher returns made aggressive shifts in their portfolios. Money market funds looking for yield, pension funds hoping for higher total returns, and Wall Street firms grasping to repeat 1993’s trading profits all appeared in this high risk camp. During 1994 they experienced keenly the measure of their risk control. Investors aiming for higher returns recognize that they must bear a higher degree of risk. But just as the level of risk influences the rewards investors reap in good times, the quality of risk control mitigates or exacerbates their distress in bad times. Risk control was the main factor in how these strategies performed during the last year’s difficult markets. (Continue reading “Lesson from Leeson and Other Investment Follies” here.) The WellsFargoNikko Global Currents publication pages:

Global Currents page 1 Global Currents page 2 Global Currents page 3 Global Currents page 4 Global Currents page 5

Harvard Business School

HARVARD BUSINESS SCHOOL: Case Study (#9-289-049) Avon Products, Inc.

By Dr. Jonathan Tiemann, Revised August 5, 1994

On June 1, 1988, Hicks B. Waldron, chairman and chief executive officer of Avon Products, Inc., was reviewing a package of proposals that he and his financial advisors were to present to the Avon board of directors for final approval the following day. These proposals included (1) a public announcement that Avon would explore plans to divest two businesses, probably at a considerable book loss; (2) a reduction of the dividend on Avon’s common stock; and (3) an exchange offer under which Avon would issue an unusual preferred stock in exchange for up to 25% of its common shares. (Click here to download Dr. Tiemann’s Avon Products, Inc. from the Harvard Business Review.)

HARVARD BUSINESS SCHOOL: Case Study (#9-290-007) NWA, Inc. – Northwest Airlines Revenue Management

By Dr. Jonathan Tiemann, July 1989

In late August 1988, Steve Elkins, Senior Director of Pricing and Inventory Management at Northwest Airlines the principal subsidiary of NWA, Inc., was preparing a capital budget request to develop a computer software system for statistical demand forecasting. The system would be part of the much larger system under Elkins’s supervision whose purpose was to design and implement fare changes on the airline’s 17,000 domestic city-pair routes, and set capacity controls on the discount fares offered on each of Northwest’s 1500 daily domestic flights. The principal difficulty Elkins found in preparing his request was estimating the economic benefit the demand forecasting system would provide. (Click here to download NWA Inc. – Northwest Airlines Revenue Management from the Harvard Business Review.)

HARVARD BUSINESS SCHOOL: Case Study (#9-289-031) Pabst Brewing Company

By Dr. Jonathan Tiemann, Revised March 1989

In the fall of 1984, Paul Kalmanovitz, owner and chairman of the S&P Company of Corte Madera, California, was contemplating his second opportunity in two years to acquire control of the Pabst Brewing Company of Milwaukee, Wisconsin. S&P already owned three other brewing concerns, Falstaff Brewing, General Brewing, and Pearl Brewing. Two years earlier G. Heileman Brewing Company of La Crosse, Wisconsin, had defeated Mr. Kalmanovitz’s attempt to acquire Pabst, though the Justice Department ultimately prevented Heileman from gaining control of Pabst. Kalmanovitz wondered if he should again bid for all or some of Pabst’s assets, and what price he ought to offer. (Click here to download Pabst Brewing Company from the Harvard Business Review.)

RossMentorExact Arbitrage Pricing and the Minimum-Variance Frontier

By Jonathan Tiemann Journal of Finance, 1988, vol. 43, issue 2, pages 327-38 Abstract: This paper examines the relationship between the Arbitrage Pricing Theory and mean-variance analysis. It derives conditions on the factor risk premia vector equivalent to the existence of a frontier portfolio with all positive portfolio weights. The paper also gives a sufficient condition under which the existence of a positive minimum-variance portfolio of all assets in an economy implies the existence of such a portfolio on a subset. If this condition holds, rejection of the hypothesis of the existence of a positive minimum-variance portfolio on the subset implies rejection on the whole set. Copyright 1988 by American Finance Association. Date: 1988. Reprinted with Permission in Stephen A. Ross, Mentor: Influence Through Generations  View citations in EconPapers (1) Track citations by RSS feed.

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