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Andrei Simonov - Michigan State University. East Lansing, MI, US

Andrei Simonov Andrei Simonov

Professor | Michigan State University

East Lansing, MI, UNITED STATES

An expert in US and international stock markets, institutional and individual investors, investment banking and behavioral finance.

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Biography

Andrei Simonov is Professor of Finance at Michigan State University, a CEPR Research Fellow in the Financial Economics program, Scientific Director of Research Center for Empirical Finance at Gaidar Institute for Economic Policy (Moscow, Russia), and a Research Associate in Stockholm International Corporate Governance Institute. He received Ph.D. in Finance from European Institute of Business Administration ( INSEAD, 2000). He also holds Ph.D. in Theoretical Physics from Moscow State University. His research interests include asset pricing, individual portfolio decision and behavioral finance. Andrei is recipient of several grants and awards. He was awarded EFA/LECG Prize for best paper in Behavioral Finance, Iddo Sarnat Memorial Award and was one of the winners of BSI Gamma Foundation Research Competition. His work is regularly presented at leading finance conferences including American Economic Association, American Finance Association, Western Finance Association, European Finance Association, CEPR and NBER meetings. His publications appear in leading Finance and Management journals including, among others, Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Review of Finance, and Management Science. His research has been covered extensively in the popular press, including, among others, The Wall Street Journal, The Times of London, The Economist, Atlantic Monthly, The Guardian, Globe and Mail, and Dow Jones Market Watch. He serves on Editorial Boards of Management Science, Financial Management, Journal of Empirical Finance, and Russian Economic Journal. At MSU, he is Academic Director of Financial Markets Institute.

Industry Expertise (3)

Writing and Editing Financial Services Education/Learning

Areas of Expertise (4)

International Finance Behavioral Finance Financial Services Asset Management

Accomplishments (3)

Professor of the Year (professional)

Voted by New Economics School Master in Finance students

Grant of FDIC Center for Financial Research (professional)

$10,000 for "On the Real Effects of Bank Bailouts: Micro-Evidence from Japan" (joint with M. Giannetti), American Economic Journal: Macroeconomics, vol. 5-1 (2013), pp. 135-167

Grant of Bank of Sweden Tercentenary Fund (professional)

SEK 1,850,000 for "Investment Banks as Insiders and the Market for Corporate Control" (with Andriy Bodnaruk and Massimo Massa), Review of Financial Studies, vol. 22-12 (2009), pp. 4989-5026

Education (3)

Moscow State University: Ph.D., Theoretical Physics 1991

INSEAD: Ph.D., Finance 2000

Moscow State University: M.S., Physics 1988

Affiliations (2)

  • Center for Empirical Finance, Gaidar IET, Moscow, Russia, Scientific Director
  • Center for Economic Policy Research, Research Affiliate

News (8)

Are you a stock or a bond?

The Economist  online

2018-08-23

A paper, published in 2003, by James Poterba of the Massachusetts Institute of Technology discovered that an average of more than 40% of the value of the 20 largest company-pension plans in America was invested in the firm’s own shares. The dangers of such a strategy had recently become apparent. When Enron failed, its employees had over 60% of their retirement savings in company stock. Another study based on Swedish data by Massimo Massa, of INSEAD, and Andrei Simonov, now of Michigan State University, also found that households tend to invest in stocks that are closely related to their employment income.

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Documents: Staffers signed Schuette real estate deals

The Detroit News  

2018-05-11

Andrei Simonov, a finance department professor at Michigan State University, said blind trusts are typically used to manage personal financial assets or private equities. It’s more rare to place personal property in a blind trust, he said. [...]

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Wall Street Analysts Are Embarrassingly Bad At Predicting The Future, Study Finds

Gizmodo  online

2018-01-10

“Overall, it’s a very good finding,” Andrei Simonov, a professor at Michigan State University who researches behavioral finance and who is unaffiliated with the research, tells me. “The big problem is that the growth of a stock is extremely difficult to predict. Who will be the next Google? Who knows.” [...]

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Gap between rich and poor is getting wider

Spartan Newsroom  online

2017-05-05

We spoke with Andrei Simonov, associate professor of finance at the Eli Broad College of Business at Michigan State University, to answer some of these questions. [...]

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Ashley Madison Hack Inspires Social Scientists To Look Behind The Names

NPR  online

2016-04-26

VEDANTAM: That's exactly right. So a second group of researchers, these include William Grieser, Nishad Kapadia, Qingqiu Li and Andrei Simonov, they looked at 47,000 Ashley Madison users. These are not CEOs and CFOs. These are just workers who use their corporate email addresses to sign up for the website. Not very smart.

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The Ashley Madison Effect on Companies

The Wall Street Journal  online

2016-03-06

Maybe it’s true that cheaters never prosper, but sometimes the companies they work for do. If you ask people whether they are cheaters, even those who are usually say they aren’t. That is a natural response, but a problem for academics trying to examine corporate behavior.

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Japan Must Let Zombie Companies Die

Bloomberg  online

2016-01-20

Imagine that you’re a Japanese 26-year-old with big dreams. You graduated from Waseda University, an elite private school, with a degree in electrical engineering. You and your college buddies used to hang around your apartment, watching anime on your LCD television, which was made by Sharp Corp. -- the world’s 10th-largest LCD TV manufacturer. Even then, you had ideas about how to improve the product.

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Beware of Nervous Fund Managers

The Wall Street Journal  online

2015-01-05

When it comes to mutual-fund managers, the adage may be true: No guts, no glory.

Investment professionals who are too scared about losses tend to perform more poorly overall, hurting both their investors and their own careers, contends a soon-to-be published study.

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Journal Articles (9)

Credit Score Doctor FMA Conferences

Luojia Hu, Xing Huang, Andrei Simonov

2017

We show that borrowers strategically boost their credit score in order to move into next credit score bin for better credit availability and loan terms. Borrowers are more likely to purchase houses after their credit scores change to qualify them for the next bin. However, the credit accounts of those individuals are more likely to become delinquent within the next four years after home purchases. The effect is front-loaded for subprime and near prime borrowers and takes three to four years for prime borrowers. This strategic behavior is not limited to 2004-2007 housing boom nor curtailed by post-bust reforms.

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Integrity, creativity, and corporate culture SSRN

William Grieser, Rachel Li, Andrei Simonov

2017

We highlight a potential trade-off between integrity and innovation in corporate culture. In particular, cultures that neglect integrity are associated with a greater probability of SEC enforcement actions for accounting misstatements, lower corporate ethics ratings by external analysts, and greater tax-avoidance. However, firms that score lower on measures of integrity within a given industry also have higher research and development output, more patents and patent citations, and greater patent diversity. Moreover, post-takeover research productivity of inventors decreases (increases) when they are merged into cultures with relatively higher (lower) scores on integrity. These results provide a potential explanation for the difficulty that firms have in sustaining integrity as a key corporate value.

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Loss-averse preferences, performance, and career success of institutional investors The Review of Financial Studies

Andriy Bodnaruk, Andrei Simonov

2016

Using survey-based measures of mutual fund manager loss aversion, we study the effects of institutional investor preferences on their investment decisions, performance, and career outcomes. We find that managers with higher aversion to losses choose portfolios with lower downside risk, increase their risk-taking more in response to poor past performance, and display a stronger disposition effect. Further, we provide evidence that managers who are more loss-averse have lower performance and are more likely to have their contracts terminated.

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Fifty shades of corporate culture SSRN

William David Grieser, Nishad Kapadia, Rachel Li, Andrei Simonov

2016

We develop a new measure of integrity as it relates to corporate culture—the number of employees who use corporate emails to register for a website that facilitates extramarital affairs. This measure is associated with firm level unethical behavior: it predicts a greater probability of SEC enforcement actions for accounting misstatements, and lower corporate ethics ratings by external analysts. However, consistent with research in psychology, we find that the measure also predicts more innovation and risk taking. Our results suggest that it is difficult to engineer a perfect corporate culture due to potential trade-offs between employee creativity, risk-taking, and integrity.

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Captive finance and firm's competitiveness Journal of Corporate Finance

Andriy Bodnaruk, William O'Brien, Andrei Simonov

2016

We study the effects of establishment of a captive finance subsidiary on parent firm's competitiveness. Firms with captives have higher profitability, larger market share, lower volatility of sales, and maintain lower cash balances. Following the establishment of a captive, a firm's profitability and its industry market share gradually increase, but it takes about four years to become economically relevant. Stock returns of companies with captive finance subsidiaries correlate more with finance industry returns than stock returns of companies without captives. We estimate that captives generate about 17% of parents' net income. Thus, significant part of profits of the largest U.S. industrial corporations comes from what in essence are financial services.

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Integrity, Creativity, and Corporate Culture SSRN

Andrei Simonov, William Grieser, Rachel Li

2016

We highlight a potential trade-off between integrity and innovation in corporate culture. In particular, cultures that neglect integrity are associated with a greater probability of SEC enforcement actions for accounting misstatements, lower corporate ethics ratings by external analysts, and greater tax-avoidance. However, firms that score lower on measures of integrity within a given industry also have higher research and development output, more patents and patent citations, and greater patent diversity. Moreover, post-takeover research productivity of inventors decreases (increases) when they are merged into cultures with relatively higher (lower) scores on integrity. These results provide a potential explanation for the difficulty that firms have in sustaining integrity as a key corporate value.

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Do Financial Experts Make Better Investment Decisions? Journal of Financial Intermediation, Forthcoming

Andriy Bodnaruk, Andrei Simonov

2014

We provide direct evidence on the effect of financial expertise on investment outcomes by analyzing private portfolios of mutual fund managers. We find no evidence that financial experts make better investment decisions than peers: they do not outperform, do not diversify their risks better, and do not exhibit lower behavioral biases. Managers do much better in stocks for which they have an information advantage over other investors, i.e., stocks that are also held by their mutual funds. More experienced managers seem to be aware of the limitations to their investment skills as they increase their holdings of mutual fund-related stocks following poor performance of their portfolios. Our results suggest that there are limits to the value added by financial expertise.

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Loss Averse Preferences, Performance, and Career Success of Institutional Investors SSRN

Andriy Bodnaruk, Andrei Simonov

2014

Using survey-based measures of mutual fund manager loss aversion, we study the effects of institutional investor preferences on their investment decisions, performance, and career outcomes. We find that managers with higher aversion to losses choose portfolios with lower downside risk, increase their riskiness more in response to poor past performance, and display a stronger disposition effect. Further, we provide evidence that more loss-averse managers have lower performance and are more likely to have their contracts terminated.

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Investment Banks as Insiders and the Market for Corporate Control The Review of Financial Studies

Andrei Simonov, Andriy Bodnaruk, Massimo Massa

2009

We study holdings in merger and acquisition (M&A) targets by financial conglomerates in which affiliated investment banks advise the bidders. We show that advisors take positions in the targets before M&A announcements. These stakes are positively related to the probability of observing the bid and to the target premium. We argue that this can be explained in terms of advisors who are privy to important information about the deal, investing in the target in the expectation of its price increasing. We document the high profits of this strategy.

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