Come for the signalling, stay for the human capital 1

This afternoon we are welcoming the honours class of 2015. It is a select group about to start a tough fourth year specialising in Economics, Risk Management or International Trade. Now there is a lot of good advice out there for students and this blog hopes to add to that stock throughout the year. To start:

  • Prof Jonathan Jansen recently had some strong words for the first years of 2015.
  • Johan Fourie makes some great points: don’t follow the crowd, ask questions, build your network etc.
  • Chris Blatmann’s advice to post-grad students are always popular.

I draw some inspiration from a Noah Smith post. He argues that “college” is not about signalling, it is about building human capital.

The job market signalling model holds that employers have difficulty determining the ability of prospective employees – you can get to the job interview and tell them you are smart and dedicated, but they unlikely to believe you. Consequently, potential employees signal their ability by obtaining certain qualifications – going to the interview with the certified copy of your honours degree will signal that you are smart and dedicated! More…


Secular Stagnation – not about church or politics – instead the idea that the developed world could be constrained to a future of persistent slow growth.

Base rates of the UK,  EU and USA central banks.

Base rates of the UK,
EU and USA central banks.

Most people have never heard of secular stagnation (unless they lived in 1938) until Larry Summers’ (Harvard University) speech at the IMF in November 2013 breathed new life into the phrase. He claimed that since the recession of 2008, the “zero lower bound” on interest rates had become an almost familiar sight, when most economists had expected it to be merely a temporary adjustment following the recession. More…

Building international links Reply

Our early 2015 research efforts continued this week by building some international ties. Prof Maria Santana-Galego of the University of the Balearic Islands visited the School and met with colleagues the the TRADE and TREES research entities.

Maria SantanaOn Tuesday she presented a paper on how trade linkages serve as a channel for the transmission of different types of crises (exchange rate, financial, sovereign debt crises). Instead of looking only at the volatility of the exchange rate during a crisis, she considers and controls for different exchange rate regimes.

In the process we learned about two cool resources:

Maria also discussed the gravity model approach with colleagues working on export margins and the identification of export opportunities. We hope to see some co-authored papers in the future.

The SA Finance Association conference Reply

Last week Andrea Saayman, Andre Heymans and Chris van Heerden kicked off the year’s research efforts with the SAFA conference in Cape Town. SAFA is back on the calender this year after a break for a few years and the Finance / Risk Management researchers enjoyed meeting up again.

SAFA 2015There were a number of interesting papers at the conference ranging from pricing and hedging, the efficient market hypothesis, portfolio diversification, investor governance etc. The colleagues spoke on the following topics:

  • Dr Van Heerden:The Influence of Higher Moments and Non-Normality on the Sharpe Ratio:A South African Perspective.
  • Prof Heymans:Measuring performance on forecasted data: A Kalman filter approach.
  • Prof Saayman: The Relationship Between Foreign Portfolio Investment and Exchange Rate Volatility in South Africa.