The Business Review

Reducing Stock Risk with Hedge Funds

Dr. Mitchell Ratner, Rider University, Lawrenceville, NJ

Dr. Chih-Chieh (Jason) Chiu, Rider University, Lawrenceville, NJ

ABSTRACT

This paper tests the risk reduction properties of hedge fund investing against a sample of stocks ranging from 1990 through 2014. GARCH dynamic conditional correlation analysis indicates that hedge funds are a significant diversifier due to the consistent imperfect relationship between the hedge fund returns and the stock return indexes. Hedge funds serve as a weak safe haven in times of extreme stock market volatility. During periods of financial crisis, hedge funds also largely function as a weak safe haven. In contrast to their name, hedge funds do not provide a traditional “hedge” against stock risk. Imperfect correlation among investments is the foundation of most asset allocation strategies. The potential benefit of portfolio diversification motivates investors to identify assets that have relatively low correlation with stocks. While stocks and bonds remain the primary assets recommended by financial professionals, investors are acutely aware that they must identify alternative assets to reap the gains from diversification. The word “hedge” in finance refers to the reduction of risk. Hedge funds were initially established to reduce the risk of stock investing. Modern hedge funds use aggressive investment strategies that are often more risky than the stock market, but still have the potential to reduce portfolio risk. As global markets continue to converge, investors need to seek out alternative assets to further gain from diversification. Hedge funds invest in a variety of securities, assets, and derivatives, both domestic and international, and are considered assets that move with relative independence from stocks. A hedge fund is similar to a mutual fund in that it pools money from many investors and purchases securities. Unlike mutual funds, hedge funds can only be sold to accredited investors (those exceeding a minimum of wealth or institutions). Since they cater to relatively sophisticated investors, there is little government regulation of the industry. Hedge fund managers generally use very aggressive strategies and are free to invest in any type of asset (stocks, bonds, commodities, real estate, derivatives, etc.). Hedge funds increase their risk relative to mutual funds in that they frequently use leverage (borrowed funds) to increase their bets. Hedge funds appeared in the early 20^th century but weren’t a consistent product until the late 1940s. While initially designed to reduce exposure to stock risk, hedge funds today are not necessarily expected to have that function. As alternative investments, however, hedge funds are expected to move differently than the stock market, and offer superior performance and/or diversification benefits compared with traditional investing. In addition to diversification benefits, hedge funds can serve as stand-alone investments. Largely the domain of the wealthy, retail investors now have the opportunity to easily purchase hedge fund-based mutual funds and exchange traded funds (ETFs). While hedge funds have outperformed the overall stock market from 1999 – 2014 (including the financial crisis of 2008), they have underperformed the broad stock market since 2009 (Copeland and Zuckerman, 2014). The perception exists that hedge funds are another tool that enhances the wealth of the rich. Regardless of wealth, this study will address the impact of hedge fund investment on a diversified stock portfolio. Using GARCH dynamic conditional correlation (DCC) this paper investigates hedge funds as a hedge, safe haven, or diversifier, against stock investment in the United States and globally from 1990-2014. Following Bauer and Lucey (2010), an effective hedge is defined as an asset that is consistently uncorrelated or negatively correlated to stock price movements. A safe haven is an asset that is consistently uncorrelated or negatively correlated to stock price movements during times of market turmoil. A diversifier is an asset with a positive, but imperfect correlation against stocks.

Full Text

Coaching, Retention, and Transfer: An Evaluation of the Framework for

Teaching (FFT) in Classroom Observation

Dr. Ashley Werdann, Saint Leo University, FL

ABSTRACT

This article examines Charlotte Danielson’s Framework for Teaching (FFT) as a comprehensive model for promoting effective instructional practice and sustained professional growth. The FFT is presented through its four domains – Planning and Preparation, Classroom Environment, Instruction, and Professional Responsibilities – each defined by observable practices and measurable outcomes. Planning and Preparation addresses lesson design, content and pedagogical knowledge, student understanding, and assessment alignment. Classroom/Learning Environment focuses on cultivating respectful, well-managed learning spaces and organizing resources to maximize engagement. Instruction emphasizes strategies that actively engage learners, employ purposeful questioning and discussion, and systematically assess understanding to inform teaching. Professional Responsibilities encompass reflective practice, accurate recordkeeping, family communication, and collaborative participation in professional learning communities. This article synthesizes these domains into an integrated framework for teacher evaluation and development, highlights implications for instructional coaching and policy, and proposes directions for research on implementation fidelity and impact on student learning. According to Sancar et al. (2021), the FFT, developed by Charlotte Danielson, is a comprehensive tool designed to promote effective teaching practices and professional growth. In fact, King (2014) contends, the FFT is widely used for teacher evaluation and professional development. The FFT is organized into four key domains: (1) Planning and Preparation; (2) Classroom/Learning Environment; (3) Instruction; and (4) Professional Responsibilities (Tigelaar et al., 2004). Specifically, Planning and Preparation focuses on how educators design their lessons, including the knowledge of content, pedagogy, and students, in addition to setting instructional outcomes and designing assessments (West & Jones, 2007). Classroom/Learning Environment emphasizes creating a respectful and productive classroom culture, managing classroom procedures, and organizing physical space to support learning (MacSuga-Gage et al., 2012). Instruction covers the actual teaching practices, such as engaging students in learning, using questioning and discussion techniques, and assessing student understanding (Liang & Dole, 2006). Professional Responsibilities, according to Matteucci et al. (2017), includes reflecting on teaching, maintaining accurate records, communicating with students’ families, and participating in the professional community. The FFT enhances education and professional practice by providing a clear structure for evaluating and improving teaching practices, while contemporaneously encouraging continuous professional growth through self-reflection and goal setting (Lim et al., 2011). Comparably, Prieto et al. (2011) maintain, the FFT promotes a shared language for discussing effective teaching, which can lead to more consistent and constructive feedback. Most importantly, Clough and Kauffmann (1999) state that the FFT supports student achievement by ensuring that t4eaching practices are aligned with research-based standards and best practices. Overall, the FFT assists educators to develop their skills, improve their instructional strategies, and create a more effective learning environment for their students. Domain 2: Classroom/Learning Environment in the FFT concentrates on creating a positive and productive learning environment. This domain is comprised of the following components: (1) cultivating respectful and affirming environments; (2) fostering a culture for learning; (3) maintaining purposeful environments; (4) supporting positive student behavior; and (5) organizing spaces for learning (Alvarez & Anderson-Ketchmark, 2011). Burke-Smalley (2018) claims that creating an environment of respect and rapport involves fostering respectful interactions between the educator and students, in addition to among the students themselves. Establishing a culture for learning emphasizes the importance of high expectations for student achievement and the educator’s commitment to the subject, while effective management of classroom routines and procedures ensures smooth and efficient operations (Van Tartwikj et al., 2009). However, managing student behavior, according to Oliver et al. (2011), requires setting clear expectations for behavior and effectively addressing any misbehavior promptly. Organizing physical space involves ensuring that the classroom is safe and conducive to learning, with appropriate use of physical resources (Habaci et al., 2013).

Full Text

Marketing Vineyards and their Regions

Dr. Stacy M. P. Schmidt, California State University, Bakersfield, CA

Dr. David L. Ralph, Pepperdine University, CA

ABSTRACT

Vineyards provide wine to restaurants, liquor stores, and grocery stores. Vineyards also have opened their vineyards to the public for wine testing. Thus, it has become vital for vineyards to have marketing strategies to market their vineyards. A region can also use the vineyard as a marketing tool to encourage and entice tourism to the area. Marketing can be utilized to increase brand recognition, boost wine consumption, and increase revenues. The vineyards can target a variety of markets. Wine consumption is important to know as well as knowing the pairing of the wines with specific markets. One market is the new generation of the Millenials. The Millenials is a generation that represents one-fourth of the US population and is also known as the “online generation”. The special characteristics and behaviors of this generation requires a variety of marketing tools. Wine consumption plays an important role in the marketing of a vineyard. Thus, it is important for a vineyard to be knowledgeable in consumption data and trends. Understanding the trends in wine consumption provides valuable information on not only who to market the wine to but also what to market. Vineyards provide wine to restaurants, liquor stores, and grocery stores. Vineyards also have opened their vineyards to the public for wine testing. Thus, it has become vital for vineyards to have marketing strategies to market their vineyards. A region can also use the vineyard as a marketing tool to encourage and entice tourism to the area. Marketing can be utilized to increase brand recognition, boost wine consumption, and increase revenues. The vineyards can target a variety of markets. Wine consumption is important to know as well as knowing the pairing of the wines with specific markets. According to the Wine Institute, 2.73 gallons of wine are consumed annually, per resident in the United States, and the numbers are increasing as the demographics of the wine industry change. One market is the new generation of the Millenials. The Millenials (Mintel Report Millenial, 2013) is a generation that represents one-fourth of the US population and is also known as the “online generation”. The special characteristics and behaviors of this generation requires a variety of marketing tools. The Millennial Generation (current ages 21 to 34) leads the way with 84 million people part of this demographic. In addition, 28% of the youngest group of Millennials (ages 21 to 27) drink wine daily. The Millennials (Newman, 2013) are in no doubt driving trends, but changes in the wine consumption demographic also come from more diversity in the wine consumer market, with more Hispanic, African American and Asian people consuming wine. Nonetheless, the generation of Baby Boomers still dominates the statistics for wine consumption, followed by Generation Y. According to Mintel research (2012), 46% of wine drinkers have consumed wine in their homes or someone else’s, with 10% of the wine drinker population increasing their consumption in the past year. According to the same survey, people believed that domestic wines produced in California were not as sophisticated or high in quality as wines imported from other countries. Based on research provided by Mintel, the latest trends within the wine industry as a whole are targeting the Millennial Generation and simplifying the wine drinking experience. As the Millennial Generation becomes of legal drinking age they drink wine at above average consumption levels and 30-34% of this generation describe themselves as high frequency wine drinkers. Based on Mintel research (2012) , the wine industry retail sales increased 5.8% from 2011 to 2012. The US ranks among the top ten tourist destinations in the world. In 2010, it received 60 million international visitors and domestic travelers made 1.5 billion “personal trips” for leisure purposes, which includes visiting wine regions. North America’s wine industry is dominated by California, a leading tourist destination for both domestic and international travelers. The wine industry in the United States gained momentum in the 1980s when winemaking began to be recognized on a professional level. As a result, consumers also started to educate themselves about wine and Americans began to change their drinking habits. Today, they have become avid wine drinkers. In 2010, the per-capita wine consumption rose to 9.42 liters, up from 8.96 liters in 2007. One of the main drivers of this growth is that younger Americans are “discovering” wine. A report published in Wine Business Monthly in February 2012 described a demographic shift among “core” wine consumers (defined as those who drink wine at least once a week). Every age group has shown increase in their wine consumption; Baby Boomers, Generation X and Generation Y. In 2010, 62% of the Generation X (35 to 46 years old) reported to be wine drinkers, while 51% of the aforementioned Millennials were regular wine drinkers. These are sizeable populations as there are 44 million people in the Generation X age group in the US, while Millennials are 70 million strong.

Full Text

Creighton University Student Managed Investment Fund

Dr. John Richard Wingender, Jr., Creighton University, Omaha, NE

ABSTRACT

The Creighton University student managed investment fund was started in 1992 by Dr. Robert Johnson with $100,000. Over the past 22 years the fund has grown in assets under management through reinvestments and additional contributions to about $5 million. Although the investment philosophy has changed over the years, the main aim of the course called the Portfolio Practicum has remained the same – to educate undergraduate students through hands-on, real-world investment management. The Portfolio Practicum has consistently outperformed the S&P 500 Index both on a total return and on a risk-adjusted rate of return basis. Former practicum students have gone on to jobs as financial analysts on Wall Street at many of the leading investment banking firms, portfolio managers at mutual funds, presidents of banks, partners at accounting firms, as well as doctors, dentists, lawyers and pharmacists. The Portfolio Practicum class is an experiential learning course in the Creighton University Heider College of Business curriculum. The course is designed for a select group of undergraduate students to manage the investment of real money into an equity fund. The main objective of the course is education with the outcome of improving job placement opportunities of graduates as they enter the first phase of their professional careers. In this regard the course has been incredibly successful. While there is no portfolio performance requirement, the students’ success has been phenomenal. The Portfolio Practicum class is one in which students manage real money for Creighton University’s endowment fund. Admission into the two-semester sequence is highly competitive. On average, 40 students apply for 16 positions in the class. The application process includes a recommendation from a business professor, submission of a resume, a personal interview with the previous class participants and faculty members, and selection by a faculty committee. The class is composed of students who have the highest intellectual level of any course offering in the university. The average grade point average (GPA) for Practicum students is about 3.7 on a 4.0 scale. Many of the students aggressively pursue careers in investments, with most choosing to intern along the way at brokerage companies, investments divisions in nationally prominent insurance companies, and the capital markets areas of Fortune 500 firms. From this class we have averaged 4 students going on to law school, 2 students going to Wall Street analyst positions, and one student going on to medical/dental/pharmacy programs each year. Successful portfolio performance has encouraged the university to increase assets under student management from $100,000 in 1992 to $5.2 million ending 2013. The Portfolio Practicum is a two-semester sequence of courses in the Heider College of Business, Portfolio Practicum I and Portfolio Practicum II. Both semester courses have been designated as senior-level Honors courses in our university Honors Program. Only Heider College of Business students can be admitted into the class. The prerequisites for the class include the core courses of the two principle of Accounting courses, Macroeconomics, Microeconomics, Business Statistics, Ethics, Managerial Finance and Investment Analysis. Traditionally the Portfolio Practicum I course has been focused on financial analysis. The idea is to require readings that educate students as Junior Financial Analysts. The curriculum has followed the Chartered Financial Analyst (CFA) Level 1 readings and many students take the CFA Level 1 exam after their two course sequence. The Portfolio Practicum II course has focused on Modern Portfolio Management. The primary textbook is Managing Investment Portfolios: A Dynamic Process (3^rd Edition) by Maginn, Tuttle, McLeavey, and E. Pinto. This book plays a pivotal role in the CFA curriculum. The emphasis of the book centers around Modern Portfolio Theory and Efficient Market analysis, the Efficient Frontier and the Capital Market Line, the Capital Asset Pricing Model and the Security Market Line, and readings on Alternative Investments. In 2014 we have added Strategic Value Investing: Practical Techniques of Leading Value Investors by Horan, Johnson and Robinson. The following sections detail the structure of the course, its educational dimensions, and the fund’s performance over time. The selection of the students for the Portfolio Practicum begins in their junior academic year. The Portfolio Practicum application requires that the prospective student get an application form (downloadable from the Portfolio Practicum Website, http://cobacourses.creighton.edu/portfolio/index.html). The application form requires a signature from a Heider College of Business professor. The student must submit a current resume. The student must also write a one-page letter in interest describing why s/he wants to be in the class. Applications are typically due just before or just after spring break. There is a limit on the number of students in the course and it is 16. This size allows for individual consultation and has been very functional for forming groups of 4 members per team. Over the years the average number of applicants has been 40 students per class. The one-year structure of the course is a requirement. Students rarely leave mid-term because doing so leaves a larger share of work to be completed by their peers. The selection process has been very successful and only a couple of students have not continued into Portfolio Practicum II.

Full Text

Distribution Practices of Women’s Promotion Groups in Senegal: A Role for Marketing

Dr. Nancy Haskell, Laval University, Quebec (Quebec) Canada

Yvonne M. L. Sawadogo, Laval University, Quebec (Quebec) Canada

Dr. Donald Beliveau, Laval University, Quebec (Quebec) Canada

ABSTRACT

In Sub-Saharan Africa, social partners and public authorities have provided assistance to local women’s promotion groups in subsistence marketplaces to assist them in producing for their own needs and, under certain conditions, to allow them to sell to the public. However, while microcredit and some basic management seminars aim at assisting these groups to engage in revenue-generating activities, they are left on their own when it comes to how to commercialise their products. This paper seeks to, first, explore the distribution practices of women’s promotion groups in Africa and, second, analyse whether appropriate distribution practices may help them improve their commercialisation and, by extension, their revenues. Several approaches were used to maximize the data gathered and to cross-validate information from different sources. Analysis based on the marketing literature offers a structured view of the distribution activities and challenges of three Women’s Promotion Groups (WPGs) in Saint-Louis, Senegal. Managerial implications are offered for both WPGs and supporting organisations. There has been marked progress in reducing global poverty over the past decades. However, despite the progress realized, the most recent estimates suggest, in 2011, more than one billion people lived on less than 1,25 USD a day (World Bank 2015a). It is therefore not surprising that poverty reduction remains a major preoccupation, especially in developing countries. Positive action programs to assist those living at or below the poverty line are numerous, initiated by supranational and national organisations as well as local authorities and organisations. In this context, women’s promotion groups (WPGs) in developing countries, in geographical zones characterized by a strong prevalence of subsistence living, are playing an important role in certain of these economies (Toledo-López et al. 2012). These groups pursue various objectives, many of which are economic. A number of these groups have received microcredit, and some have benefited from basic management education to assist them in engaging in revenue-generating activities. These actions are aimed at breaking the poverty cycle within impoverished communities. However, Duflo (2010) suggests that “giving the fight against poverty to the poor” may require more context-specific action and structured evaluation if these efforts are to truly help the very poor to improve their conditions. However, little is known about women’s promotion groups, their operations, and the difficulties they face. Furthermore, since promoting economic activities is the focus of much of the assistance they receive, and revenue generation is one of the ultimate goals (to allow group members to improve their living conditions), knowledge of their practices is imperative. Unfortunately, no research was found that delves into the realities of commercialisation by WPGs. The particular focus of this research is thus on distribution, an important element of commercialisation that is intimately related to the cultural context within which an organisation operates. This paper first introduces subsistence marketplaces and women’s promotion groups. The multiple approaches used to collect data are described, and a profile of the three women’s promotion groups in Saint-Louis, Senegal that are the subject of this study is presented. Then a structured description of their distribution practices, both business-to-business and business-to-consumer, is presented from a marketing perspective. Finally, implications for the WPGs and for the organisations that offer them support are discussed. A consensus exists about the severity of poverty that predominates in developing countries. However, there is divergence concerning the approach to evaluate poverty. Prahalad and Hart (2002) estimated that 4 billion people live at the base of the pyramid (Hammond and Prahalad 2004; Hart and Christensen 2002) with less than 1500 US dollars annual per capita income, based on Purchasing Power Parity (PPP), or about 4.11 USD per day. However, others place subsistence marketplaces far below this level in terms of poverty threshold. For instance, Karnani (2007) defined the poverty line as being a PPP of 2.00 USD per day. and the World Bank distinguishes levels of poverty by defining extreme poverty as a PPP of 1.25 USD /day (Damon 2010), or approximately 455 USD /year. Furthermore, Ireland (2008) suggests a distinction between rural and urban poverty. More recently, different disciplines have focused on impoverished communities and nations, each aiming to develop knowledge and understanding and address poverty. Kohl et al (2013) offer an excellent review of different disciplines and their research perspectives on subsistence marketplaces. From the business literature, scholars (e.g. Yunis 1994; Chu 2007) study the effects of providing micro loans to the poor to finance their entrepreneurial activities. In addition, the well-known Bottom of the Pyramid (BOP) approach (Prahalad and Hart 1999) suggests that large firms doing business with the poor will foster market productivity, which will in turn lead to an increase in GDP and help alleviate poverty. However, the original BOP business model has evolved substantially over the years and most articles offer management and marketing advice to enterprises wishing to enter BOP markets, where the poor are seen primarily as consumers.

Full Text