Weekly Top 5 Papers – June 5th 2017

1. Manipulation in the VIX? by John Griffin (University of Texas at Austin – Department of Finance) and Amin Shams (University of Texas at Austin – Department of Finance )

I am excited about research that is practical and helps us understand the way our financial system work, and maybe make them better. I typically do research on things that are potentially, illegal, illicit, or immoral in financial markets; topics in forensic finance. Although there have credible allegations and evidence that LIBOR, FX, swaps, gold, silver, ect., seem to have been gamed, there is surprisingly extremely little academic work in these fields, perhaps because academics like to work in areas where others are working. But, the gaming of financial markets through financial sophistry is financial thievery and quite harmful to the trust that our financial system depends on. Amin Shams and I became interested in the settlement process in this market after further study, because it had features that make it have the potential to be gamed. Nevertheless, I was skeptical, but the more we researched the market and the more data we received, the more interesting it appeared.

I think academics can help shed light on markets features that allow gaming and those that do not. A credible and robust non-result can also be interesting and I have published work showing no questionable activity as well. The downloads are interesting because some academics told me that they didn’t find the paper very interesting, perhaps because it was too applied. I think financial research should have applications and not just be useful for ivory-tower lunch discussions. The liveliest and heated ivory-tower lunch discussions I recall were always on applied topics. I would like to encourage young researchers to not just write papers to try to get tenure, but to pick areas they are passionate about and where one can, at least potentially, make a small difference. -John M. Griffin

2. Putting Integrity Into Finance: A Purely Positive Approach by Werner Erhard (Independent) and Michael Jensen (SSRN)

3. Contabilidad: qué Dice y qué no Dice (Accounting: What it is and What it is Not) by Pablo Fernandez (University of Navarra – IESE Business School)

The most common problems of interpretation of accounting figures come from ignoring that “every accounting figure (except for the year) is an opinion, NOT a fact”. – Pablo Fernández

4. A Brief Introduction to the Basics of Game Theory by Matthew O. Jackson (Stanford University – Department of Economics)

5. Squaring Venture Capital Valuations with Reality by Will Gornall (University of British Columbia (UBC) – Sauder School of Business) and Ilya Strebulaev (Stanford University – Graduate School of Business)