Finance Superstars that are Changing Our World - CISDM Research Day at the Isenberg School Rocks!

Yesterday, at the Isenberg School of Management, we were treated to brilliant talks and discussions at the Center for International Securities and Derivative Markets (CISDM) Research Day!

The event from 11:30AM until 4:30PM was organized by my great Finance colleague, Dr. Mila Sherman.

Two of the talks: "Can Financial Engineering Cure Cancer? A New Approach to Funding Biomedical Innovation" and "Lies my Finance Professor Told Me: Reconciling Efficient Markets and Behavioral Finance via Evolutionary Biology and the Cognitive Neurosciences" were given by the Finance Superstar, Dr. Andrew Lo, of the MIT Sloan School.

Our Isenberg Dean, Dr. Mark Fuller, Associate Dean Dr. Jane Miller,  and the UMass Amherst VCRE, Dr. Mike Malone, all joined us for Dr. Lo's first presentation. It was great to have faculty come from Babson, Suffolk University, and Smith College to this event, as well as several alums, practitioners, and also students. Several of our PhD students in Management Science also came, which was great.

I have heard Professor Lo speak on several occasions because we had hosted him before and I have spoken at various venues with him  in both NYC and Chicago. Mila and I were in the Network Analysis segment of the latter conference which was on Measuring Systemic Risk.

He is brilliant and in his financial engineering and curing cancer presentation (on which I took copious notes) he noted that if we could create a fund of $30 billion we should be on our way to curing cancer - the strategy should be, as in finance, to diversify the portfolio and enable the investigation of multiple pathways with 150 cancer compounds, for example. NIH cannot support all the cancer researchers out there!

Who has not been affected by cancer, whether individually or through having a relative or friend suffering from the disease. Andrew noted that his mother died of cancer and my dissertation advisor at Brown University, Dr. Stella Dafermos, also died of cancer at age 49 back in 1990. She was a genius. We know so much now how cancer and other diseases work at the molecular level and have had amazing drug discoveries such as Gleevec and Avastin but the right investments and financial support are needed. He noted that no new Alzheimer's drugs have been introduced in the past decade!

The business model of pharma is broken and the economic risk has increased. Private equity is not ideal for the financing of drug discoveries. We need to get the funds into the system to finance drug development and use financial engineering and securitization.

He also spoke about orphan (rare) diseases and associated drugs and innovations and that business models for those work - pricing of certain drugs, however, is another issue.

Dr. Lo emphasized: Doing Well with Doing Good . All the Operations Research folks out there will recall one of our profession's themes of Doing Good with Good O.R. (Operations Research).

My research group at the Supernetworks Center at the Isenberg School has written several papers on the pharmaceutical industry with a focus on competitive supply chains. Hence, his first talk was especially  thrilling and intellectually captivating. Our paper: Pharmaceutical Supply Chain Networks with Outsourcing Under Price and Quality Competition, Anna Nagurney, Dong Li, and Ladimer S. Nagurney, International Transactions in Operational Research 20(6): (2013) pp 859-888, focuses on quality issues.  Our paper, A Supply Chain Generalized Network Oligopoly Model for Pharmaceuticals Under Brand Differentiation and Perishability, Amir H. Masoumi, Min Yu, and Anna Nagurney, Transportation Research E 48: (2012) pp 762-780, investigates even the impact of the loss of patent rights and competition from generics.

In his second talk, Dr. Lo  emphasized how insights from evolutionary biology and neurosciences can reveal human decision-making behavior and what it means for financial decision-making as well. I loved the interdisciplinarity of his talks - bringing biological insights to economics and finance. He is a true Renaissance man and incredibly  inspiring. He noted that rationality is the delicate balance between emotion and logic and stated that wisdom of crowds works, unlike the madness of mobs!

I very much appreciated his adaptive market hypothesis and how this concept differs from the efficient market hypothesis. Lo also recognized the 3 recent recipients of the Nobel Prize in Economic Sciences - Drs. Fama, Shiller, and Hansen, and how the media emphasizes the disparities and different perspectives associated with them.

The other two talks were given by my wonderful Finance colleagues, Dr. Bing Liang, who spoke on "Hedge Fund Ownership and Stock Market Efficiency" and Dr. Hossein Kazemi, who gave the last presentation of the day on "Dynamics of Hedge Fund Exposures: Implications for Performance and Herding."

Thanks to my colleagues and to Dr. Andrew Lo for such a fabulous intellectual feast that we all experienced at the CISDM Research Day!

My Student, the President

In 1997, I co-authored with Dr. Stavros Siokos, the book, Financial Networks: Statics and Dynamics, and financial networks are very hot now as both a topic in research and practice due to the financial crisis.

Dr. Siokos had been one of my doctoral students, and I had chaired his dissertation in Operations Research. I am a faculty member in the Isenberg School but have also supervised several doctoral dissertations in the College of Engineering, since I hold courtesy appointments in two departments there. Dr. Siokos is originally from Greece and he needed to complete his dissertation in the College of Engineering at UMass Amherst (rather than in Management Science) in order not to serve in the Greek army. The title of his dissertation was: International multi-sector, multi-instrument financial modeling and computation: Statics and dynamics, Department of Industrial Engineering and Operations Research, University of Massachusetts Amherst, 1998.

Together we had co-authored papers which had appeared in such journals as Networks and Annals of Operations Research.

He has had a meteoric career in finance and serves as a Center Associate of the Virtual Center for Supernetworks that I direct at the Isenberg School of Management.

Dr. Siokos has now been appointed President of Sciens Fund of Hedge Funds Management (which is a fund of funds) and had previously served as a non-executive member of Sciens. This reminds me of supernetwoks, which are "networks of networks."

Dr. Siokos served for many years as the Managing Director within the equities division of Citigroup in London, where he was Global Head of Alternative Execution Sales (program trading, algorithmic trading, Direct Market Access), Global Head of portfolio trading strategies as well as head of the company's pension funds and insurance companies equity structured solutions in Europe. He, since April 2008, until now, was the Deputy General Manager & Head of Asset management, Private Banking, Private Equity & Alternative Investments of Piraeus Bank in Athens, Greece. He has been top ranked in most of the major European Investment and Alternative Execution surveys in the quantitative services sector over the last nine years.

Several of my former doctoral students have achieved the rank of Full Professor as academics and I can now say that a former doctoral student of mine is now a President!

I could not be prouder and like to think that it is the methodologies that he learned and advanced in operations research and the management sciences that have enabled him to flourish in financial services at the global level and to be responsible for a fund worth billions of dollars.

News Highlights from the Isenberg School -- Business Schools and Research

The intellectual life of a university depends on the research of its faculty and the give and take with students through teaching and scholarship.

I teach and conduct research at the Isenberg School of Management at UMass Amherst, which values interdisciplinarity. The academic departments at Isenberg clearly reflect this from my own department, Finance and Operations Management, to Resource Economics, Sport Management, and Hospitality and Tourism Management, plus even the more, shall I say, "classical" departments of Management, Marketing, and Accounting and Information Systems.

My department, in the last two years, has recruited two new Assistant Professors, Dr. Ahmed Ghoniem and Dr. Senay Solak, from Virginia Tech and Georgia Tech, respectively. Their work has already earned not only accolades but grants: Dr. Ghoniem has received funding from the Qatar National Research Fund to study how to minimize air traffic congestion whereas Dr. Solak has received funding from NSF to conduct research on housing foreclosures and nonprofit organizations.

Last year, we recruited the new Dean of the Isenberg School, Dr. Mark Fuller, whose appointment is also in my department (and, yes, I served on the search committees for all these hires, and chaired those of the two above).

Also, based on a proposal for a cluster hire that I, with colleagues in Computer Science, Electrical and Computer Engineering, and even Communications, was involved in, we were able to recruit for a position in cyber security. Dr. Traci Hess and her husband, Dr. John Wells, both from Washington State University, will be joining my department this Fall as Associate Professors.

My colleagues conduct research on hedge funds, serve on FDA panels on food safety and risk, explore issues of privacy and marketing, to highlight only a few, very cool research topics.

My own research and passion is heavily focused on networks, especially on complex networks with applications as varied as supply chains, humanitarian logistics, financial networks, electric power generation, and transportation. My recent research has emphasized network design and fragility and vulnerability analysis with applications to critical needs and healthcare products from vaccines to medicines as well as sustainability.

Being in a business school, one can conduct research on the latest topics and this brings an energy and enthusiasm to the classroom which are palpable. Being trained in operations research and management science (my advisor at Brown University, Dr. Stella Dafermos, was the only female at that time in Engineering and Applied Math) one has the skill set to address many important problems.

Although campuses will be teaming with students, both new and experienced ones, come the Fall, during the summer, the faculty are getting prepared as they work on new breakthroughs, present their work at conferences around the globe, rework their course materials, and take the time to reflect.

Soon I will be giving keynote talks in Europe -- at the Computational Management Science in Vienna, Austria and at the Yalta Optimization Conference -- Network Science in Ukraine. As I tell my students, research can really take you places and introduce you to fascinating people!

Working at a university is a great privilege and responsibility and always filled with new challenges, opportunities, and, sometimes, even drama (I will write about the latter topic sometime in the future)!