October 20, 2003

Los Angeles — Brett Trueman has rejoined the UCLA Anderson School of Management faculty after a 15-year stint at the Haas School of Business at UC Berkeley. He first taught at UCLA Anderson in the accounting department from 1981 to 1988, the last two years of which he served as area chair.

“I have great respect for the accounting faculty and students here,” Professor Trueman said, “and I'm looking forward to returning to this environment.”

While at the Haas School, Prof. Trueman served as area chair of the accounting group, held the Donald and Ruth Seiler Chair of Public Accounting and established the Center for Financial Reporting and Management, of which he served as faculty director. In 1995, he received the school's Earl F. Cheit Award in Teaching Excellence for his service in the MBA program.

Additionally, during his tenure at the Haas School, Prof. Trueman served on the doctoral committee for UCLA Anderson associate professor David Aboody, who commented, “Professor Trueman will be a great asset to the school as a teacher, researcher and colleague.”

UCLA Anderson's accounting faculty has grown significantly in recent years. Faculty are publishing in the most prestigious accounting journals and have developed new courses for the MBA program, the undergraduate accounting minor and executive education programs. Faculty research spans a wide array of topics such as analyst recommendations, individual retirement choices, executive compensation and valuation of stock options. Business and financial media frequently consult with UCLA Anderson faculty on a variety of accounting and financial reporting issues.

Prof. Trueman has published widely and is on the editorial boards of several prestigious accounting and finance journals, including Financial Analysts Journal, Contemporary Accounting Research, Journal of Accounting and Auditing and Finance. His primary research interest is the performance of security analysts' stock recommendations. His co-authored studies of data from Zach's Investment Research and First Call indicate that analysts' buy recommendations significantly outperformed their sell recommendations over the 1986-1999 period. However, the evidence is more mixed for the 2000-2001 period.

In a recent paper in Financial Analysts Journal, Prof. Trueman and his co-authors note that the stocks least favored by analysts in 2000 and 2001 earned an average annualized market-adjusted return of 13.44 percent while the stocks most highly recommended underperformed the market by 7.06 percent — a return difference of more than 20 percentage points.

Prof. Trueman's work is timely given the recent focus on conflicts of interest among analysts working in investment banking firms.

“We've known for some time that there is a potential for conflict of interest when securities analysts and investment bankers work for the same firm,” he said. “The question is whether we can find evidence of it in the performance of analysts' recommendations. Whether conflicts of interests actually exist, regulation may be the best way to restore investor confidence.”

Prof. Trueman is also interested in the growing impact that financial information on the Web has on investors and the economy. He notes that the Web has given investors greater access to recommendations by stock analysts as well as to corporate financial reports. This potentially increases the influence of analysts on investment decisions and the impact of managerial accounting choices on the market.

Financial literacy is critical for investors, commented Prof. Trueman. He notes that the 10K and 10Q reports filed with the Securities and Exchange Commission contain a wealth of information about firm performance and suggests that the footnotes to the financial statements, found in these filings, can be particularly useful.

“Investors who don't have the tools to analyze the financial statements and the accompanying footnotes in these SEC filings would probably be wise to invest in mutual funds or index funds, rather than in individual companies,” he added.

When he returns to the classroom next quarter, Prof. Trueman will offer a course on corporate financial reporting in the MBA Program. The course will provide students with the tools to better analyze financial information for themselves.

“One of the fun things about my classes,” he said, “is that students see the practical value right away.”

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