SnoQap

Nov 6

Nov 6 Gift Cards, Good Cards and Asymmetric Information

Picture this: It is your birthday, and among the countless toys, cards, and other items you’ve received is a veritable mountain of gift cards. While you are glad that people thought of you, you are also a little confused about why so many people gave you gift cards. After all, they are just a less useful version of cash that’s accepted at a small subset of stores and which you either don’t use, don’t spend all of, or use but have to pay the remaining balance of your purchase out of pocket. Yet despite this, gift cards are by far the preferred gift to cash, which has led to tens if not hundreds of millions of dollars being spent on them each year. One explanation of this phenomenon has its roots in the field of asymmetric information, which can also explain key features of car markets, charities, and more.

Mar 14

Mar 14 Advancements and Challenges in Blockchain Technology

Syed Umar Bukhari

Finance

Blockchain technology is a distributed ledger system that allows for secure and transparent transactions between parties (Swan, 2015). Initially created to support Bitcoin, the first cryptocurrency, it has since expanded to various use cases, from financial services to supply chain management. Ethereum, unlike Bitcoin, was designed to support smart contracts and decentralized applications, making it a popular platform for developers. However, Ethereum, like other blockchain networks, faces scalability challenges, and Layer 2 scaling solutions have been developed to address this issue. One key innovation that has been enabled by blockchain technology is the concept of smart contracts, which are self-executing contracts with the terms of the agreement written directly into code.

May 13

May 13 The Need for Teaching Financial Literacy

Bobby Markus

Finance

The educational system has failed millions of people for years by not implementing a personal finance class that will adequately improve the financial literacy of our future. Teaching kids from a young age, even as early as elementary school, what money is, its value, how to save, invest, and spend will provide future generations with a better future. As we age, our financial decisions become increasingly frequent and complex, so it is important to stress the necessity of developing one’s financial literacy skills before they enter the real world.

Apr 29

Apr 29 Private Equity’s J-Curve and Its Mitigation

Ethan Wildes

Finance

Within private equity, a fund’s returns often resemble a J-Curve where there exists a small loss before a continued gain. This image would resemble a “J” when charted. This is especially common for private equity firms that purchase struggling companies and attempt to turn them around. These firms will take on unprofitable businesses, and tag along management fees that keep investor returns low or negative until their investments begin to mature, and the purchased businesses become profitable. This creates a period wherein traditional private equity investment is unprofitable and returns are low, or the dip at the beginning of the “J”. These cash flows depend on the “timing of cash flows, timing of performance, and market performance” (Diller, 20). By pulling these levers one way or another, the J-curve can be manipulated. With research indicating that funds with at least 15% private investment outperform their peers, the benefits of seeking these investments are clear. But how can we reduce the time in which these investments underperform?

Apr 6

Apr 6 Direct Listing’s Potential Effect on Investment Banks

Jack Geiger

Finance

The fundamental definition of capitalism provides opportunity in the form of wealth to those who make certain investments. Despite some of their practices coming under scrutiny, investment banks have long played a crucial part to the US economy, and especially to capitalism. Investment banks have provided capital raising services to companies in search of capital to expand by acting as a middleman between entrepreneurship and public investors. One drawback to investment banks engaging in capital raising is that they pertain large fees, and at times high risk to their clients. Recently, a new form of capital raising called “direct listing” will eliminate the need for underwriters and allow firms to go immediately to the New York Stock Exchange, receiving capital from the public directly. But, this newly added capital raising program poses a major threat to many investment banks.

Feb 9

Feb 9 Fixed Foreign Exchange Rate Regime

Vincent Z. Yu

Finance

There are two major types of foreign exchange regimes: fixed exchange rate policy and floating. As its literal meaning on appearance, a fixed exchange rate is a regime in which a country’s currency exchange rate is tied to the currency of another country or the price of gold. A floating exchange rate policy, instead, gives the currency a much wider range to float without predominant regulatory control. The price of a particular currency in this scenario is almost purely driven by the relative supply and demand of the currency in the foreign exchange market. We will define the exchange rate in our discussion as the rate at which a domestic currency can be converted to one unit of U.S. Dollar, the value of which is assumed unchanged, we will now proceed with our discussion of the fixed-rate system.

Jan 19

Jan 19 The Need for Teaching Financial Literacy

Bobby Markus

Finance

The educational system has failed millions of people for years by not implementing a personal finance class that will adequately improve the financial literacy of our future. Teaching kids from a young age, even as early as elementary school, what money is, its value, how to save, invest, and spend will provide future generations with a better future. As we age, our financial decisions become increasingly frequent and complex, so it is important to stress the necessity of developing one’s financial literacy skills before they enter the real world.

Nov 17

Nov 17 The Risks and Rewards of Crypto Savings Accounts

Bobby Markus

Finance

In recent years, cryptocurrencies have received a lot of attention due to their projections of utilization in the near future. Some trade the assets for speculative, profit-driven short term intentions, while others truly believe crypto is the future and want to join the long-term movement in the beginning. Either way, many investors have benefitted from the exponential growth of the popular cryptocurrencies. Some investors have looked to see how they could amplify their returns even more through earning passive income on their crypto holdings. Cryptocurrency savings accounts have become popular among crypto investors due to their high returning yields on crypto assets that many investors already owned. These accounts are similar to traditional bank accounts in that they provide a platform for consumers to store their assets for future use and the institution lends it to borrowers, and in exchange investors earn interest on their deposits. Crypto savings accounts work a little differently from traditional bank accounts and credit unions, as there are many advantages and disadvantages of this new innovative product.

Sep 14

Sep 14 Pandemic Investors

Kirtan Patel

Finance

The initial fear of Covid-19 in Wuhan, China and the first reported case in the United States of America marked a new day for investors worldwide. The fear of the pandemic had led us to halt everything, forcing our lives into an ultimate state of limbo, and financially damaging all sectors as lockdowns continued to be enforced. This catastrophic event led to one of the greatest and sharpest declines across all sectors in the market. Eclipsing the turmoil created during the 2008 recessions, “6 trillion USD in wealth was washed out from the global stock market in the week of 24th February” (Chowdhury). This unprecedented amount would lead the International Monetary Fund to declare that the world is facing the worst economic crisis since the Great Depression.

Aug 12

Aug 12 The Power of Cathie Woods’ Long-Term Perspective

Andy Colando

Finance

Cathie Woods—the founder, CEO, and Chief Investment Officer of Ark Investment LLC—became something of a financial Rockstar in 2020. Her flagship portfolio, the Ark Innovation ETF (ARKK), has returned close to 50% in the last 12 months and has an annualized return of over 25% since its inception in November 2014. Much of this success has been attributed to the explosive growth of stocks in emerging or disruptive industries, affirming Woods’ foresight in key areas of growth and innovation over the last 6 years. These include an emphasis on autonomous vehicles, fintech disruptors like cryptocurrency, space exploration, and the advancement of genomics, all of which Ark has additional ETFs to capitalize on specifically. As you may expect, Ark’s innovation-focused investing strategy can require a great deal of conviction, and with that the resolve to prioritize a long-term outlook over daily price movements of stocks and quarterly results when making decisions. This may sound obvious, but it is a key aspect of markets that investors and company managers alike often struggle with.