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Michael Huggins, Ph.D., will join Georgia Southern University on August 1 as the Dean of the College of Science and Mathematics. “I am excited to welcome Dr. Huggins to our academic leadership,” said Provost and Vice President for Academic Affairs Carl Reiber, Ph.D. “Dr. Huggins has a distinguished career filled with research, service and mentorship. He will be a valuable partner as we move forward with our leadership goals. He brings with him the working knowledge of how to lead a College, along with the foundations needed to advance our research mission.” Huggins comes to Georgia Southern from Tarleton State University, where he has served as a dean since 2020. He led three academic departments with nine undergraduate degree programs and three master’s degree programs. While serving as dean at Tarleton State, Huggins established a $15 million College of Science and Mathematics (COSM) fundraising initiative. He also led efforts to improve COSM First-Time-In-College (FTIC) retention rates resulting in an improvement from 67.3% COSM FTIC retention for the Fall 2019 cohort to 71.7% retention rate for the Fall 2021 COSM FTIC cohort; a 6.5% improvement in just two years. “I am excited to join the Georgia Southern team,” Huggins said. “I look forward to working with the faculty and staff to develop initiatives that support the growth of the College of Science and Mathematics and to ensure the success for all students during their time at the University and beyond.” Huggins holds a B.S. in Chemistry from the University of West Florida, a Ph.D. in Chemistry from University of Nevada, Reno and completed his postdoctoral at University of Texas at Austin. He is also a graduate from the Harvard University Institute for Management and Leadership in Education. To connect with Michael Huggins or to learn more about Georgia Southern University — simply reach out to Georgia Southern's Director of Communications Jennifer Wise at jwise@georgiasouthern.edu to arrange an interview today.
Expert Insight: The Voice of Alexa: How Speech Characteristics Impact Consumer Decisions
In the 2020 film “Superintelligence,” an all-powerful artificial intelligence attempts to take over the world, and it studies an average person, played by Melissa McCarthy, to decide if humanity is worth saving. The AI is voiced by James Corden—a voice it chooses because it knows it’s one McCarthy’s character will engage with. Rajiv Garg, associate professor of Information Systems & Operations Management at Emory’s Goizueta Business School, shows the “Superintelligence” trailer before his research presentations to set the tone. Garg conducts research that explores the impact of artificial intelligence voices on consumer behavior and purchase intent, along with Haris Krijestorac, a professor at HEC Paris, and Vijay Mahajan, a professor from The University of Texas at Austin. Garg’s research began when Amazon launched celebrity voices for its Alexa device in 2019. From Samuel L. Jackson to Shaquille O’Neal, users can now get their news and entertainment, while interacting with their favorite superstars. “I questioned if certain voices could get more engagement or more purchases from consumers,” Garg says. If Alexa starts talking to you in Samuel L. Jackson’s voice, will you continue the conversation? What could Samuel L. Jackson’s voice sell you that you would buy? Garg and his team began their research by collecting more than 300 celebrity voice samples, which they analyzed based on their sound characteristics, such as amplitude, frequency, and entropy. They looked at 20 sound characteristics and identified that all the voices could be segmented into six clusters: ostentatious, colloquial, friendly, authoritative, seductive, and suave. The team then created advertisements for select products using computer generated voices for each of the six clusters, opting for artificial intelligence-created speech instead of celebrity deep fakes due to permission legalities. They chose a shoe and an office chair as their products, and created two different advertisements for each product. One ad was simple, denoting the shoe as comfortable for all-day wear and the office chair as comfortable for sitting in for extended time periods. The other ad was hedonic, denoting the shoe as crafted with Italian leather and the office chair equipped with several massage features. They recorded the four advertisements using both a female and male voice for all six voice clusters. Study participants listened to each of the four advertisements in one of the 12 voices, which was randomly selected. After the advertisement was played, participants were asked if they wanted more information, and later, if they wanted to buy the product (omitting the price as to not add another factor to their decision making). Influencing Consumer Behavior For simple, utilitarian products, they found no significant effect of voice on information seeking behavior. Garg says once participants hear this type of advertisement, they simply decide to purchase or move on. Participants do, however, engage more in information seeking behavior for hedonic products when the voice is ostentatious, seductive, or authoritative. The team also found men were more likely than women to engage with ostentatious or seductive voices, and women were more likely to engage with friendly or colloquial voices. Overall, they found participants did not seek information with male voices. For information seeking, men and women only engage if the voices are female, which is somewhat intuitive. The industry is doing this—Alexa, Google, and Siri all have a female voice. In terms of purchase intention, they found ostentatious voices have higher yields for utilitarian products. Men, especially, were more likely than women to purchase a utilitarian product advertised in an ostentatious voice. Think about advertising a stapler. It’s a stapler—it staples paper—but you advertise it in a French accent to make it sound interesting. Conversely, for hedonic products, an ostentatious voice has a negative effect on purchase intent because Garg says it can make the product sound gimmicky. Their research shows colloquial voices do the best here because people focus more on the advertisement’s content. Across the board, they found seductive voices have a negative effect on purchase intent, but more so on utilitarian products compared to hedonic ones. Men were more likely than women to respond positively to seductive and suave voices. Applying the results Voices are another way smart device companies can personalize their customers’ experiences. Garg says these companies should be aware that there may be a certain voice that will garner the best engagement. Their findings are not isolated to business, but may apply to other industries, such as the media. Garg says, for example, if publications intend to increase reader curiosity and engagement, they should use a female colloquial voice on “click to listen” features. Although not yet tested, Garg says he wouldn’t be surprised if their results extend to real-world settings with real human voices as well. During their research, Garg’s team asked participants if they had heard the advertisement voices before, and about 15 percent of respondents says they had. "These were voices we’d created for the first time,” Garg says. “If they say they’ve heard the voice before, that means they were thinking of them as human voices. Although we didn’t study it that way, I do believe what we’re seeing will be relevant for actual human being’s voices and interactions.” Having researched this for years, Garg says every time he listens to a voice, whether a customer service representative or podcast host, he questions whether or not it is impacting his behavior. A lot of times when I’m making a decision, I know that I’m making that decision passively because of the voice. “I’m acting 50 percent based on the rational information in the voice, but the other 50 percent I just want to listen more. There is an inherent desire for a certain voice.” Garg says his favorite part of the research are those “aha moments,” whether they be the influence of voice in his own life or in the industry—such as large companies using female voices in their products to draw engagement. He says he hopes to continue doing this kind of research to help startups and other companies perform better, as AI-powered voices continue to change the way people interact with technology and consume information. “We’re finding these interesting phenomena that can help create new products that are more effective,” Garg says. “I am trying to increase the economic surplus, in some ways to improve society, and this technology presents numerous opportunities.” Looking to know more? Rajiv Garg from Emory’s Goizueta Business School is available to speak with media – simply click on his icon now to arrange an interview today.
UConn Expert, 10 Years after Sandy Hook, on the Lies that 'Plague the U.S.'
UConn professor and journalist Amanda J. Crawford considers the misinformation that spread like wildfire after tragic school shooting at Sandy Hook Elementary School to be "the first major conspiracy theory of the modern social media age." Ten years after 26 young students and school staff were killed in the massacre, the impact of that day in 2012 continues to reverberate in America today. On this solemn anniversary, Crawford writes about the aftermath of Sandy Hook misinformation in a new essay for The Conversation: Conspiracy theories are powerful forces in the U.S. They have damaged public health amid a global pandemic, shaken faith in the democratic process and helped spark a violent assault on the U.S. Capitol in January 2021. These conspiracy theories are part of a dangerous misinformation crisis that has been building for years in the U.S. While American politics has long had a paranoid streak, and belief in conspiracy theories is nothing new, outlandish conspiracy theories born on social media now regularly achieve mainstream acceptance and are echoed by people in power. Recently, one of the most popular American conspiracy theorists faced consequences in court for his part in spreading viral lies. Right-wing radio host Alex Jones and his company, Infowars, were ordered by juries in Connecticut and Texas to pay nearly $1.5 billion in damages to relatives of victims killed in a mass shooting at Sandy Hook Elementary School a decade ago. Jones had falsely claimed that the shooting was a hoax. As a journalism professor at the University of Connecticut, I have studied the misinformation that surrounded the mass shooting in Newtown, Connecticut, on Dec. 14, 2012 – including Jones’ role in spreading it to his audience of millions. I consider it the first major conspiracy theory of the modern social media age, and I believe we can trace our current predicament to the tragedy’s aftermath. Ten years ago, the Sandy Hook shooting demonstrated how fringe ideas could quickly become mainstream on social media and win support from various establishment figures – even when the conspiracy theory targeted grieving families of young students and school staff killed during the massacre. Those who claimed the tragedy was a hoax showed up in Newtown and harassed people connected to the shooting. This provided an early example of how misinformation spread on social media could cause real-world harm. Amanda J. Crawford is a veteran political reporter, literary journalist, and expert in journalism ethics, misinformation, conspiracy theories, and the First Amendment. Click on her icon now to arrange an interview with her today.
Partnership with Hims & Hers Expands In-Person Healthcare Access in Four States
Hims & Hers Health, Inc. (“Hims & Hers”, NYSE: HIMS), the trusted consumer-first platform focused on providing modern personalized health and wellness experiences to consumers, and one of the nation’s premier health systems, ChristianaCare, today announced a partnership that will expand access to healthcare services and create a more seamless care journey for patients. The partnership will benefit customers in Delaware, Maryland, New Jersey and Pennsylvania, and expands the Hims & Hers’ partnership network with providers to now include 10 states and Washington D.C. Hims & Hers offers treatments for a broad range of conditions, including those related to sexual health, hair loss, dermatology, mental health and primary care. This collaboration allows licensed medical providers on the Hims & Hers platform to connect patients with ChristianaCare’s industry leading Center for Virtual Health and extensive primary and specialty care provider network when appropriate. Referrals may occur if a patient presents with a complex medical history, requires additional in-person follow up or evaluation, or needs care for a condition that the Hims & Hers platform does not support. This collaboration advances the Hims & Hers mission to expand access to high-quality, convenient and affordable care by adding another high-quality health system to its growing network of provider relationships. “ChristianaCare stands for excellence in healthcare and is rated as one of the best hospitals in America, making them an excellent and trusted partner in ensuring a high-quality care experience throughout a consumer’s journey,” said Hims & Hers Chief Operating Officer Melissa Baird. “Healthcare consumers today want easy-to-use, on-demand access to high-quality care both digitally and in-person, so our proprietary platform, coupled with partnerships such as ChristianaCare, help them smoothly navigate more of their healthcare needs.” ChristianaCare is one of the country’s most dynamic healthcare organizations that is committed to improving health outcomes, increasing access to high-quality care and lowering the costs for patients. Its Center for Virtual Health makes health care accessible and convenient, available 24/7 through computer, tablet or smartphone. By partnering with Hims & Hers, ChristianaCare gains access to a broader patient population for its Center for Virtual Health and extensive network of primary care, outpatient services, and specialty care services, including its comprehensive stroke center and regional centers of excellence in heart and vascular care, cancer care and women’s health. “ChristianaCare is thrilled to partner with Hims & Hers to make high-quality health care available to its customers who have complex needs or need additional services that Hims & Hers does not provide,” said Sharon Anderson, MS, RN, FACHE, ChristianaCare’s chief virtual health officer and president of ChristianaCare’s Center for Virtual Health. “At ChristianaCare, our Center for Virtual Health provides personalized health care consultations that are immediate, coordinated, continuous and available 24/7, delivering value to our patients and making a positive impact on health,” she said. This partnership with ChristianaCare builds upon established relationships with other high-quality providers, including Carbon Health in California; Oschner in Louisiana; Mount Sinai Health System in New York City; and Privia in the District of Columbia, Georgia, Maryland, Texas, and Virginia. ChristianaCare will provide support to select counties within Delaware, New Jersey, Pennsylvania and Maryland.
'Good Guys With Guns May Be Heroes—But They're Not Our Solution '
Each tragic event mass shooting dominates the news cycle, leaving the public grieving -- and demanding answers and solutions. But while an armed gunman in the recent mass shooting at Greenwood Park Mall in Indiana was stopped by an armed citizen with his own legally possessed gun, Kerri M. Raissian and Jennifer Necci Dineen from the University of Connecticut's ARMS Center are warning against thinking about "good guys with guns" as the solution to the gun violence problem in the United States: But his heroic success is rare, and while we applaud his courage and skill, "good guys" with guns can only (maybe) end future shootings. What we really need is to prevent them. While it may ultimately be the case that "the only thing that stops a bad guy with a gun, is a good guy with a gun," the truth is America's "good guys" have more guns than ever before, and sadly, they have not always stopped the shooter in time. The Texas House of Representatives preliminary report revealed that in Uvalde, Texas, 376 police waited to engage the active shooter for 77 minutes due to systemic failures and miscommunication. Such failures were also seen in Parkland, Fla. in 2018, when 17 students and staff were killed. And the good guys' inability to stop the shooter isn't always a failure, sometimes the shooters are at a tactical disadvantage. Most recently in the Highland Park parade shooting and Las Vegas Route 91 Harvest music fest, the shooters were elevated and difficult to reach. A regular good guy is not able to safely or effectively respond when bullets are raining down. Of the 433 active shooter cases since 2001, an armed bystander shot the attacker in just 22 of the incidents. In almost half of those, the "good guy" was a security guard or an off-duty police officer. But even these "success stories" are tragedies—because if a good guy is responding, shots have been fired. People are likely injured—or worse—dead. Communities are shattered. And in the process, a regular good guy has been asked to do something none of us should ever have to do—stopping the bad guy likely means ending a human life. Success is not achieved if people die. That's not safety; that's salvaging. Their Newsweek commentary is attached here and is a must-read for anyone following this issue. Kerri M. Raissian is associate professor of public policy at the University of Connecticut, co-director of the University of Connecticut's ARMS Center, and co-leader of Connecticut's Scholars Strategy Network. She is available to speak to media about this important topic - simply click on her icon now to arrange and interview today.
Ask an #Expert - Is there any way to temper America's boiling housing market?
U.S. HOUSING PRICES STILL RISING ALONG WITH MORTGAGE RATES When mortgage rates rise, home prices tend to level off or decline because fewer people can afford to buy. Experts are counting on that adage to help cool the nation’s torrid housing market. But the latest analysis of the most overvalued markets shows prices still are climbing despite the increasing mortgage rates, which last week reached their highest level in more than three years. In all 100 markets surveyed by researchers at Florida Atlantic University and Florida International University, buyers continue to pay higher premiums – that’s the difference between where home prices should be based on historical trends and where they are now. Two months ago, Los Angeles, Provo, Utah and other metro areas in the Western part of the country developed “pricing crowns,” an indication that those housing markets could be slowing. But home values have since reaccelerated, prompting concern that a looming downturn in some areas could be worse than expected. “Eventually mortgage rates will slow down home prices, but it hasn’t happened so far,” said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business. “We should not see rapid upticks in prices as mortgage rates rise. It’s that kind of exuberance that led to past housing downturns.” Boise, Idaho is the nation’s most overvalued housing market, as it has been since the researchers first released their rankings last summer. At the end of February, Boise buyers were paying an average price of $513,849, even though historical trends indicate the average price should be $291,389. That 76.34 percent premium is well ahead of No. 2 Austin, Texas (64.80 percent). The full rankings with interactive graphics can be found here. Charlotte, North Carolina entered the top 10 overvalued markets for the first time with a premium of 50.14 percent. February’s average home price in Charlotte was $353,106, although a history of past sales suggests that price should be $235,188. “Charlotte’s significant and rapidly growing premium is similar to other Southern metros that are all experiencing fast price appreciation,” said Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate. “The drivers of this appear to be large population increases in these areas combined with a significant shortage in housing inventory.” Each month, Johnson and Beracha rank the most overvalued housing markets of America’s 100 largest metros, similar to the popular S&P CoreLogic Case-Shiller home price index. Johnson and Beracha incorporate average or expected price changes and provide an estimate of how much a market’s housing stock is over- or undervalued, relative to its historic pricing. The data covers single-family homes, townhomes, condominiums and co-ops. Six Florida metros, led by Lakeland, all rank among the nation’s 25 most overvalued markets with premiums of more than 40 percent. The Miami metro, with a premium of nearly 25 percent, remains the least overvalued market in the Sunshine State. As the U.S. housing market cools, metros with strong population gains and shortages of homes for sale will fare best, although those markets will continue to struggle with affordability, the researchers predict. Metros with flat or falling populations and more available homes for sale could face price declines, making those areas more attainable for young families and first-time buyers. Johnson said consumers could be taking big risks if they jump into the U.S. housing market now. “We are near the peak of the current housing cycle, and you never want to buy near the top of the market,” he said. “Consumers need to pause if their main motivation is to buy because they fear prices will rise even higher. Prices are high now, but they always moderate back toward a long-term pricing trend. Perhaps staying where you are now and letting this irrational market settle would be one of the best decisions you could make.” Ken Johnson is the associate dean and professor in the College of Business at Florida Atlantic University. Ken is available to speak to media about this topic – simply click on his icon to arrange an interview and time.
Ask an Expert: Should Gaming Companies Release Their Latest, Greatest Platform Updates Early?
Late last year, Emory Business published an excellent article featuring research by Emory’s Ramnath K. Chellappa. An excerpt is included below and an attachment to the full article is attached as well. In June 2016, Xbox executive Phil Spencer told technology blog The Verge that it might be “crazy to announce something this early” as he unveiled the release of Xbox One X. It was a full year before the gaming console was set to hit the market. But Spencer, executive vice president of gaming at Microsoft, did so to arm customers with “as much information as possible.” He also wanted to communicate to developers what tools they’d have at their disposal. However, new research by Ramnath K. Chellappa, professor of Information Systems & Operations Management; associate dean and academic director for the MS in Business Analytics at Goizueta Business School, and Rajiv Mukherjee, assistant professor of information and operations management, Texas A&M University Mays Business School, shows that these types of preannouncements, no matter how informative, may not always be in a company’s best interests. According to Chellappa and Mukherjee, the value of preannouncing the latest and greatest features of a gaming console isn’t nearly as straightforward as the value gained by alerting customers to a new version of a Ford F150. While it may sound counterintuitive, as Chellappa and Mukherjee explain in their recent paper, “Platform Preannouncement Strategies: The Strategic Role of Information in Two-Sided Markets Competition,” sometimes the best way to announce new features in a platform-based world is by saying nothing at all. “We’re dealing with an ecosystem when we buy platforms,” Chellappa explains. “There’s a big difference between how products provide utility to an end-user versus how platforms provide utility to two sides of a market, one of which might be end-users.” When a company unveils a new version of a bicycle or television, there isn’t an ecosystem associated with those products. “But when you buy a gaming console, the value of you owning that console goes up as more of your friends play the same console,” Chellappa says. In their paper, the authors refer to this type of value as “same-side network effects.” In the platform world, Chellappa adds, there are also “cross-side network effects” in play—that the value of the gaming console goes up as more games are developed for that console. While many studies in marketing have focused on product preannouncements, the pair’s paper, published in Management Science earlier this year, is the first to study the use of preannouncements as a strategic lever for platforms rather than products. To conduct their research, the authors used game theoretic analysis to study three specific preannouncement strategies: formal (advertising, participating in tradeshows, developer training programs); informal (releasing information on a user or developer forum); and no announcement at all. The authors use Microsoft’s Xbox and Sony’s PlayStation gaming consoles as the primary setup in their paper (although their findings are generalizable to similar platforms). What Chellappa and Mukherjee found was that there were scenarios where it made sense to preannounce, but other scenarios where companies would be better off making either a lackluster preannouncement or none at all. “You would think that if I’m going to put out a new platform that has a lot of new features, I should inform the market about all those things,” explains Chellappa. “But what we find is that sometimes the competitive effects can force you not to announce much about the products you’re releasing because it might create a kind of a price competition.” For instance, a headline in an August 2020 blog in tomsguide.com comparing Xbox One X to Sony’s PlayStation 4 Pro, stated: “The Xbox One has more power than the PlayStation 4 Pro, but Sony fights back with an incredible game lineup and a lower price.” The article also includes insight including: Agents and Developers Create Business Model for Two-Sided Markets and Strategic Preannouncements Push Prices and Licensing Fees Higher The article is attached here – it’s well worth reading the entire piece. Gaming is a billion-dollar business – and if you are looking to know more about this subject – then let our experts help. Dr. Ramnath K. Chellappa is Associate Dean and Academic Director of the Master of Science in Business Analytics program. He is also the Goizueta Foundation Term Professor of Information Systems & Operations Management at the Goizueta Business School, Emory University. Ramnath is available to speak with media regarding this topic – simply click on his icon now to arrange an interview today.
Recently, the expertise of Georgia Southern University’s researchers was featured in an in-depth piece by Business Insider Magazine. U.S. oncology company OncoTEX has made a significant leap in the future of cancer treatment. A part of the bioscience development portfolio The iQ Group Global, OncoTEX has licensed a gold compound platform technology, AuraTEX, that helps destroy cancer cells by using the body’s immune system. The gold-based compounds enter cancer cells and attack them from the inside. Through this process, the tumours are disrupted, and cancer cells are made visible, causing the human body’s immune response to kick in. With the immune system and gold compounds working together, killer T-cells and the drug destroy the remaining cancer. The futuristic technology was developed in collaboration with the University of Texas at Austin, Georgia Southern University, and Wright State University, before being licensed to OncoTEX. In the coming months, OncoTEX and the University of Texas at Austin will test the gold compounds in rigorous studies to learn more about the treatment and its potential in fighting various forms of cancer. December 16 - Business Insider The full article is attached. And, If you’re a journalist looking to cover this new research that Georgia Southern is a major part of - – then let us help. We have experts available to answer your questions - simply reach out to Georgia Southern Director of Communications Jennifer Wise at jwise@georgiasouthern.edu to arrange an interview today.
It was a tragic day in America this week as a 15-year-old is in custody after allegedly opening fire on a school in Oxford, Michigan, which left three teenagers dead and at least eight more wounded by the gunfire. Three students were killed in the attack at the school some 40 miles north of downtown Detroit -- Madisyn Baldwin, 17; Tate Myre, 16; and Hana St. Juliana, 14, authorities said. Myre died in a patrol car while a deputy was taking him to a hospital, Bouchard said. Eight others -- seven students and a teacher -- were shot, Bouchard said. Two were in critical condition Wednesday morning, he said. Among the wounded were a 14-year-old girl who was on a ventilator following surgery, Bouchard said Tuesday night. A 14-year-old boy also had a gunshot wound to the jaw and head, while the teacher who was shot had been discharged. The attack was the deadliest US school shooting since eight students and two teachers were slain in May 2018 at Texas' Santa Fe High School, according to Education Week. There have been 28 school shootings this year -- 20 since August 1 -- by its tally. December 01 - CNN Many are wondering how students, teachers, first responders and families grapple with incidents with this level of trauma and horror. If you are a reporter looking to cover the issues survivors of mass-shooting events might face, then let us help. Dr. Laura Wilson is a clinical psychologist whose expertise focuses on post-trauma functioning, particularly in survivors of sexual violence or mass trauma (e.g., terrorism, mass shootings, combat). Her research interests extend to predictors of violence and aggression, including psychophysiological and personality factors, as well as indicators of PTSD following mass trauma, long-term functioning among first responders, outcomes among survivors of sexual violence and the influence of media on mental illness stigma. Dr. Wilson is available to speak with media, simply click on her icon to arrange an interview today.
Emory Experts - Post-Financial Crisis: How Well do Mutual Fund Stocks Fare?
Following the global financial crisis in 2008, the assets of passively managed mutual funds have ballooned, while the market share of actively managed funds has fallen dramatically. Addressing this topic, a new research has been coauthored by Jeffrey “Jeff” Busse, professor of finance, and Goizueta alumni Kiseo Chung 17PhD, assistant professor of finance, Texas Tech University and Badrinath Kottimukkalur 17PhD, assistant professor of finance, George Washington University. In their paper, the researchers explain the shift in assets from actively managed funds to passive funds, “Impediments to Active Stock Selection and the Growth in Passive Fund Management. In 1999, Busse and his coauthors explain, the net assets of passive funds were “less than an eighth the assets of active funds.” But by the end of 2019, “the market share of passive equity funds increased to more than 50 percent,” Busse, Chung, and Kottimukkalur note. Passive funds track indices such as the S&P 500, Dow Jones Industrial Average, NASDAQ Composite, and Wilshire 5000—all indices that have been difficult to beat over the last decade. According to the Wall Street Journal, from 2008 to 2018, more than 80 percent of actively managed funds in the U.S. underperformed the S&P Composite 1500. This is in large part, the trio notes in their paper, because the so-called “FAANG” stocks—Facebook, Apple, Amazon, Netflix, and Google—comprise such a large part of these indices. In fact, the top 10 stocks in the S&P 500 currently make up around 30 percent of its market cap. “The market caps of these companies are huge, and they’ve done exceptionally well since the financial crisis,” Busse explains. Hence, active fund managers and their teams of analysts have found it much more challenging to discover undervalued and overlooked stocks with positive alphas ─ the stocks that outperform an index. “As such, a general move toward passively managed funds is not so surprising,” the paper reveals. Finding Diamonds and Avoiding Duds Making it even more difficult to find diamonds in the rough is a lack of volatility in the stock market. Except for some isolated periods, including the month or so around the start of the pandemic in March 2020, the market hasn’t experienced much volatility since 2008. Without wide swings in prices, fund managers have less opportunity to buy low and sell high. Over the same time period, aggregate stock liquidity has also been high, which means less chance for fund managers to pick up winners at bargain prices. “When there’s money in the market—when there’s liquidity—it means there aren’t a lot of disagreements on prices,” explains Busse. “Liquidity is inversely related to mispricing,” the researchers explain in their paper. This combination of circumstances—the rise of the FAANG stocks, the lack of market volatility, and higher liquidity—is making it much more difficult for actively managed funds to find stocks that will help their funds beat the indices, and therefore, outperform the passive funds. As a result, justifying their management fees gets more complicated. According to Thomson Reuters Lipper, the average expense ratio (management fees divided by total investment in a fund) for actively managed funds is 1.4 percent compared to 0.6 percent for the average passive fund—nearly three times as much. While active fund managers have realized that these higher costs are no longer paying off and have moved to reduce them, actively managed funds continue to lose market share. Market Share Gain of Passively Managed Funds While the authors weren’t surprised by the growth of passively managed funds, they were surprised by how much they grew. From 1999 to 2019, the authors note, the number of actively managed funds grew by 11 percent, while the number of passively managed funds increased by 244 percent. “There haven’t been any papers that try to explain why passive funds have gained so much market share,” says Busse. He and his coauthors believe their research illustrates that it’s in large part because the market, post-financial crisis, is challenging for stock pickers. “As such, it has been difficult for actively-managed funds to recoup the costs associated with active management, and compared to earlier periods, passively managed funds are better positioned to gain market share,” they explain. “As the payoffs to active management decrease, it becomes more difficult to justify the costs of active management, and, thus, we expect funds to decrease these costs given their negative performance implications.” Busse doesn’t believe the current fund management environment will continue indefinitely. When the pandemic knocked the S&P 500 down 30 percent in March 2020, managers did gain opportunities to find positive alpha stocks—which they bought. “It’s just, on average, over the last 10 years, there haven’t been enough of those opportunities,” explains Busse. “It’s a matter of hanging in there and, in some sense, keeping your investors from fleeing to passive funds until the environment is a little bit better.” Jeffrey Busse is the Goizueta Foundation Term Professor of Finance where his research focuses on investments, with an emphasis on mutual funds. Jeff is available to speak with the media regarding this important topic – simply click on his icon now to arrange an interview today.
