Luxury Goods and the Equity Premium

What a great article The equity risk premium has puzzled researchers for years. In a nutshell it is the finding that the equity risk premium demanded by investors is too large to be explained by changes in stock returns or changes in consumption unless very high levels of risk aversion were assumed. (See Grossman-Schiller, 1981, Mehra-Prescott 1985). In a forthcoming JF article, … [ Read more ]

Do Accountants Who Act as Consultants Take Greater Care or Cut Corners?

In the wake of accounting scandals at companies like WorldCom, Tyco and Enron, Congress and regulators focused on the apparent conflict between accountants who were doing audits while earning high-margin consulting fees at the troubled firms. In a burst of reform, most accounting firms were forced to separate their auditing and consulting businesses. A new Wharton paper, however, challenges the idea that lucrative consulting contracts … [ Read more ]

Soldier of Fortune 500: A Management Survival Guide for the Consulting Wars

A must read for any consultant or more importantly any one who works with or hires consultants. Perhaps most importantly from a financial perspective, Romaine lays out a new conflict within the nexus of contracts: the shareholder vs. the consultant. While not necessarily against each other, the consultant has a much shorter time frame and hence differing incentives and we know that incentive … [ Read more ]