SAF Professor's research receives international recognition

Wednesday, February 12, 2014

School of Accounting and Finance professor’s research receives international recognition
by Patty Mah

Prof. Blake PhillipsThe Journal of Investment Management (JOIM) has recognized co-authored research by University of Southern California Professor Lawrence E. Harris, University of California - Berkeley Professor Ethan Namvar, and University of Waterloo Professor Blake Phillips with their 2013 Special Distinction Award. Candidates for this annual award are selected from among published work in the Journal within a calendar year. The final selection panel consists of Nobel laureates Harry M. Markowitz, Robert C. Merton, Myron S. Scholes, and William F. Sharpe.

Professors Harris, Namvar, and Phillips’s paper, Price Inflation and Wealth Transfer During the 2008 SEC Short Sale Ban which appeared in the second quarter 2013 issue of Journal of Investment Management, focuses on the turmoil in financial markets following the collapse of Lehman Brothers Holdings Inc., a former global financial services firm. In 2008 the Securities and Exchange Commission (SEC) banned short selling of financial sector stocks in the United States. The objective was to restore market equilibrium and stabilize prices by removing this source of downward pressure. Their research estimates that the short sale ban inflated prices of effected stocks by approximately 10%-12%. The effect of the ban was not permanent, thus investors that purchased stock during the ban paid more than they would have otherwise. The research provides a conservative estimate of $2.3-$4.9 billion USD in wealth transfer from buyers to sellers as a result of the ban.

This co-authored paper is a continued demonstration of how academic research contributes to the formation of financial market regulation and oversight policy. Analysis of the implications of the short sale ban was broad and varied by universities around the world.  In an interview with Reuters, Christopher Cox, former chair of the SEC commented, “knowing what we know now, I believe on balance, the commission would not do it [short-sale ban on financials] again. The costs appear to outweigh the benefits”.

The Journal of Investment Management has recently been ranked 8 out of 41 financial journals for global impact and first among practitioner publications. The Special Distinction Award, along with the Harry M. Markowitz Award will be announced later this year at the Spring 2014 JOIM Conference.

Professor Phillips joined the University of Waterloo in 2009 after completing his PhD in finance at the University of Alberta. Prof. Phillips currently teaches finance to undergraduate students at the School.