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PROPER PORTFOLIO DIVERSIFICATION HEDGES RISKS IN A VOLATILE MARKET.
John Zdanowicz |
The relationship between a stock portfolio's size
and the risk it holds is often misunderstood and a topic of heightened interest for today's individual investors. Seeking to clarify
the correlation in his paper, "How Many Stocks Do You Need to be Diversified?", College Professor of Finance John Zdanowicz analyzed
almost all publicly-traded equity securities in the 504 months spanning January 1960 to December 2001.
The study disputes the commonly-held belief that
diversification beyond 10 or 20 securities is superfluous and does little to reduce portfolio risk, he said. Individual stocks have
three forms of risk: firm risk, industry risk, and market risk. Firm risk and industry risk can be diversified away by investing in
different stocks and in different industries. Only market risk is not diversifiable. Market risk is rewarded with higher expected
returns while diversifiable risk is not. His research shows that diversifiable risk can be reduced substantially with portfolios
containing 100 or more stocks.
"Individual investors can accomplish this objective
by investing in well-diversified, low-expense mutual funds or exchange-traded funds," Zdanowicz said.
According to his study, diversifiable risk has been
increasing significantly over the last 42 years. Thus, proper portfolio diversification has gained prominence as a strategy for
reducing risk in today's volatile market.
The research is co-authored by finance professors
Daniel Burnside and Donald Chambers, of the University of Rochester and Lafayette College, respectively. It appears in the July
edition of the AAII Journal, in print and online for subscribers at www.aaii.com, the American Association of Individual
Investors.
.: COLLEGE MENTORING PROGRAM GEARS UP FOR EXPANSION.
Created by the College's Alumni Circle, the Pilot Mentoring Program originated last fall as an opportunity for professionals to give a leg-up to students preparing to enter the business arena. Members of the College's student organizations were invited to pair up with Alumni Circle representatives, who served as mentors through the Spring 2004 semester.
Rich Danze |
Rich Danze (MBA '03), vice president of operations and technology for The Miami Herald, shared his experiences as mentor to Eduardo Mahomar.
"Eduardo and I got together about once a week, and I had him sit in on operations meetings, executive interviews, and large group staff meetings outlining goals for the division, its future direction and focus in 2005," Danze said. "He even had one-on-one sessions with other department heads to gain broader insights into business perspectives."
James R. Bussey |
Protégé Ricky Sant partnered with James R. Bussey (EMBA '99), executive assistant to Executive Dean Joyce Elam.
"[My mentor] helped me develop a career timeline and put me in touch with other people who may be of value to me," Sant said. "I appreciated his advice."
Bussey said he benefited as well, feeling that he affected the life of a young professional and "gained a fresh perspective" from interacting with students.
The program will be expanded this Fall to include more participants. Prospective mentors are asked to attend an Orientation Breakfast on October 14, a Mid-Review Picnic on January 29, and a Closing Reception on April 7. Applications are available on August 16. For more information, call the Office of Alumni and Partner relations at 305-348-4227 or 305-348-0397 or send an e-mail to Cristina Jaramillo.
.: EXXONMOBIL ANNOUNCES ANOTHER MASSIVE FURNITURE DONATION TO THE COLLEGE.
Hundreds of chairs were delivered to FIU this month, the first wave of almost 1,500 pieces of assorted office furnishings given to the College in a second contribution from ExxonMobil as it settles in to its restructured Coral Gables operation. The donation also includes an array of desks, tables, credenzas, bookcases, filing cabinets, TVs and VCRs, and modular office components.
"This is a massive amount of furniture," James R. Bussey, executive assistant to Executive Dean Joyce Elam, said. "We're talking 10 to 15, 53-foot tractor trailers of furniture, and the College is grateful for the donation."
Edward Glab |
The gesture marks the second gift from the petrochemical giant in as many months. Eight storage pods containing 430 items were shipped at the end of May and await distribution to College offices and student areas.
Instrumental in arranging both donations was Edward Glab, 25-year ExxonMobil executive turned acting director of the Knight Ridder Center for Excellence in Management. Glab said that, all told, the furnishings have an estimated value of at least $250,000.
"Put another way," he said, "there's enough furniture there to fill a four-story office building."
.: GROUPS CO-SPONSOR A NIGHT OF LATIN RHYTHM.
About 60 members of the Business Alumni Chapter and the National Society of Hispanic MBAs (NSHMBA) follow the smooth moves of Nelson Vallin as he introduces them to the intricacies of salsa dancing.
With a one-two-three, Nelson Vallin (BA '99) lead the evening's dance lessons as the Business Alumni Chapter and the National Society of Hispanic MBAs (NSHMBA) hosted Salsa Night at the Renaissance in the Gables on July 23. Members of the Salsa Racing Dance Studio were on hand for free demonstrations and lessons. Vallin, the Chapter's vice president of programming, empowered the enthusiastic crowd with step-by-step basics, then opened the floor, and the party began. Missed Salsa Night? The Business Alumni Chapter has an array of events planned for coming months. Visit the events calendar at the Chapter's web site.
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.: THE WALL STREET JOURNAL REPORTS: COLLEGE'S SCHOOL OF ACCOUNTING IS LARGEST IN THE NATION.
 Universities across the
country are experiencing record enrollments in their accountancy programs, but the College's School of Accounting
takes top-ranking as the nation's largest, according to The Wall Street Journal.
In its article of July 29,
the WSJ reported that the College program has registered a 43% hike in enrollment between 2000 and 2003, prevailing
as the premier producer of accountants in the U.S. and surpassing such prestigious institutions as the University of
Michigan and the University of Illinois at Urbana-Champaign, which also show record enrollments.
The stats were provided by
the American Institute of Certified Public Accountants (AICPA), the national professional organization for all
CPAs. Previous AICPA reports noted that in the School of Accounting's relatively short 30-year history, it has
produced two Gold Medals on the CPA exam, which denote the top score in the nation; a Silver Medal, for the
second-highest score in the nation; and four Florida Top-10 awards, including one for the highest marks in the
state.
"We have a fine School of Accounting," said Executive Dean Joyce Elam. "And we're proud of our graduates, many of whom are leaders in the field, not just in South Florida, but throughout the U.S. and overseas."
The School's Academic
Advisor Marteda Turner said that a quarter of the program's graduate students are FIU alumni, the majority
holding bachelor's degrees in engineering, pre-med, psychology, or education. And almost a third of the current
accounting undergraduate majors are aiming for dual degrees, most commonly with finance.
"We knew we were one of the best in quality, but we didn't know we were the best in size, too," said Manuel Dieguez, the School's associate director.
.: MANAGEMENT AND INTERNATIONAL BUSINESS DEPARTMENT CREATES ONLINE, INTERNATIONAL CASE STUDY JOURNAL.
Randall Martin displays the homepage
of the Online Journal of International Case Analysis (OJICA), a project he's spearheading to offer free and rapid
dissemination of current cases and searchable archives.
Aiming to construct the
ultimate case journal, professors in Management and International Business are working toward a January premier for
what they say will be the only free online international case journal in existence.
Eight months in the works,
the project—the Online Journal of International Case Analysis or OJICA—is registered with the Library of Congress
and can be accessed at http://business.fiu.edu/ojica/. Viewers will find a homepage featuring a mission statement and a
sample case submitted by a colleague of project quarterback Randall Martin.
"We want to offer an
opportunity for research and commentary in all business disciplines and social sciences," Martin said. "The scope
of this journal is just one of the characteristics that will distinguish it."
Experts in Germany,
Nigeria, Guatemala, Indonesia, and Japan are among those in 13 countries who already have offered to proffer case
studies, according to Department Chairperson Galen Kroeck. He said the journal initially will promote only business
cases, eventually expanding into such fields as design, social sciences, medicine, and public administration.
Access will be free, compared to some sources, which charge $8 a case. Kroeck said he hopes to put forth a dozen
new cases every month.
"A major goal for this
journal will be rapid turnaround—from submission, to decision, to publication, to archiving," Kroeck said.
.: OPE CUSTOMIZES CERTIFIED FINANCIAL PLANNER™ FOR NORTHWESTERN MUTUAL.
Thirty employees of the
Northwestern Mutual Financial Network come from points around South Florida—Fort Myers, Palm Beach, Boca Raton, and
Miami—once a week to the company's Fort Lauderdale headquarters to, of all things, go to school.
They're attending a
Certified Financial PlannerT program, customized by the College's Office of Professional Education (OPE) and taken
to their doorstep in a series of eight, five-week courses that will culminate in their sitting for the board exam.
Northwestern Mutual's Managing Partner Chuck McIntyre is responsible for setting the wheels in motion. He said he
wasn't at all surprised when nearly 20 percent of his representatives volunteered to participate at their own
expense.
"This is an intense
commitment on their part and shows they all really want to be certified financial planners," McIntyre said.
"The world is in convergence. Stockbrokers, insurance reps, estate planners, and now bankers are all selling
insurance and securities. Everybody's in this world of financial services. It really makes sense to have
credentials."
The
internationally-recognized certificate is becoming highly sought-after as deregulation homogenizes the industry,
according to OPE Director of Business Development Vince Daniels. Although the program usually runs at capacity when offered on campus,
Daniels said this is the first time his office has taken it on the road.
"It's hard for working
people to travel to Miami on the weekend to take classes. What Chuck McIntyre has done is made it convenient for his
employees," Daniels said. "And they have formed a team. A lot of people find it hard to study on their own.
Here, they know they're not alone."
For more information on its
programs, visit the OPE web site.
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Carlos Migoya (BBA '74), Dean's Council member and president of Dade and Monroe Counties for Wachovia Bank, N.A., was elected to serve as 2003-2004 campaign co-chairman for the United Way of Miami-Dade County.
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Justo Luis Pozo (BBA '80), FIU Alumni Association Board of Directors member, was awarded the Florida International University Distinguished Service Medallion for his achievements as president and founder of Preferred Care Partners PSO Health Plan.
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Julia Miller, a business analyst for FP&L, won the "best student" award for the graduating class of August 2004 in the Masters of Science in Management Information Systems program. Miller finished the program with a perfect 4.0.
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