August 22, 2005

Mark GrinblattLOS ANGELES - Mark S. Grinblatt, professor of finance at UCLA Anderson School of Management, recently was appointed to the J. Clayburn LaForce Chair in Management, named in honor of the former dean of UCLA Anderson. The chair is the fourth of five funded by a generous gift from Clark Cornell. Grinblatt is its first recipient.

Rakesh K. Sarin, senior associate dean and chairman of the faculty at UCLA Anderson, points out that LaForce’s own work focused on economics and its history. Therefore, it is particularly appropriate for a member of Anderson’s finance faculty with a strong interest in economics as well as a doctorate in the field to fill the chair that bears his name.

“Mark is one of the top finance scholars whose work has had a global impact,” Sarin says. “He has made important contributions to asset pricing, mutual fund performance evaluation and investor behavior. He is a leader and an original thinker who works with care on both theoretical and empirical issues.”

Noting that LaForce was the dean who hired him in 1981 and also served as his mentor, Grinblatt says he considers the appointment an enormous honor. LaForce was the first person he contacted upon receiving the chair.

“I can’t think of a better name to have associated with my title,” Grinblatt says. “Clay was an inspiring leader who brought the school to true prominence during his deanship.”

The most important criterion for awarding a chair is exceptional scholarship, and the broad spectrum of subjects that Grinblatt studies was a key factor in the decision. He explains that the many years he has spent working in finance have continually widened the range of topics that interest him. At the moment, he is concentrating on behavioral economics with three ongoing projects.

One is Grinblatt’s recent research into the decision-making process for consumers buying an automobile, with findings focused on the influence exerted by a neighbor’s purchase. Along with two colleagues in Finland, Grinblatt analyzed the extensive records available from the two most heavily populated Finnish provinces.

“The role of interpersonal effects in consumption has generated a long-term debate in mainstream economics,” says Grinblatt. “Our investigation not only verified the existence of these effects in this context, but also provided evidence of whether they can be accounted for by informational or behavioral considerations, which represent two of the most popular branches of economics.”

Clarifying what is meant by the two terms, Grinblatt explains that information economics applies when the consumer views other people’s purchases as evidence of the product’s real value and behavioral economics applies when other people’s purchases trigger a psychological need either to conform or rebel against expectations. A lack of information has made it difficult to assess this question of rational versus emotional influence. However, the Finnish dataset was an ideal testing ground with a very large sample and considerable detail that was used to screen out other attributes that might be responsible for the effects.

While confirming significant social impact on automobile preferences, especially if the purchasing neighbor lives in close proximity, Grinblatt’s results also documented some unexpected trends. Surprisingly, neighbor-influenced choices were more prevalent in the lowest social classes and for purchases of used cars.

Automobiles are a highly visible commodity and could be expected to be particularly prone to emotionally driven concerns, like envy or snobbery. However, these findings do not support a “keeping up with the Joneses” scenario. Instead, Grinblatt and his group believe information sharing with its link to learning is the better explanation. The study caught the attention of The New York Times and prompted a feature article.

Read a working paper by Professor Grinblatt on interpersonal effects in consumption.

While still involved in the creation of new knowledge, Grinblatt is actively engaged in passing on his broad range of expertise. In addition to being a well-respected teacher (he was named Teacher of the Year by the 1993 Fully Employed MBA Program), he is very involved in mentoring doctoral students. He also is at work on a second textbook; his first text, Financial Markets and Corporate Strategy, has been widely accepted and is used in the most prestigious educational institutions.

Beyond the classroom, Grinblatt includes the larger finance and economics community in his efforts. He is a research associate with the National Bureau of Economic Research, a nonprofit organization that promotes investigations into all areas of economics. Only the most elite practitioners belong and must be elected to the position. In addition, he recently was selected as president of the Western Finance Association, an international professional society, where his main goal is to create a climate that supports the best possible financial research.

“The field of finance has been very good to me,” Grinblatt says. “Not only has it provided me with stimulating and interesting work, but it has also supported a happy life for my whole family. I want to give back by helping the younger generation as I was helped by the older generation before me.”

About UCLA Anderson School of Management
UCLA Anderson School of Management is perennially ranked among the top-tier business schools in the world. Award-winning faculty renowned for their research and teaching, highly selective admissions, successful alumni and world-class facilities combine to provide an extraordinary learning environment. UCLA Anderson constituents are part of a culture that values individual vision, intellectual discipline and a sense of teamwork and collegiality.

Established in 1935, UCLA Anderson School of Management provides management education to more than 1,400 students enrolled in MBA and doctoral programs, and some 2,000 executives and managers enrolled annually in executive education programs. Recognizing that the school offers unparalleled expertise in management education, the world's business community turns to UCLA Anderson School of Management as a center of influence for the ideas, innovations, strategies and talent that will shape the future.

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