Meet UBC Sauder’s New Faculty - Alberto Teguia
This year, UBC Sauder welcomed six new full-time lecturers, tenured and tenure-track faculty to the school. At UBC Sauder, faculty members are more than just ‘professors.’ They conduct impactful research that is changing how society views the world while also inspiring students to pursue their academic passions and become the thoughtful, values-driven leaders the business world needs.
In the fifth of this series, we introduce you to Alberto Teguia, Assistant Professor, Finance Division, UBC Sauder School of Business.
What brought you to UBC Sauder?
Three main things brought me here: the long history of excellent research in finance theory and overall strength of its faculty, the excellent job it does developing junior faculty, and the great interaction I had with my possible future colleagues during my visit.
What are your areas of research and how did you get into this field?
My research spans two main areas. First, asset pricing theory with a focus on both behavioral finance and portfolio choice over the life-cycle. I am interested in modelling psychological biases or rule of thumbs and embedding these biases in asset pricing models. The second area is strategic trading by institutional investors (such as hedge funds, mutual funds, banks, dealers).
I got into behavioral finance in part because of my lack of formal training in finance when I started my Ph.D. A fundamental concept in finance is that investors who make a mistake will quickly be driven out of the market and those mistakes will have transient impact on prices at best. I was not aware of this concept before starting my Ph.D., but I already had an interest in psychology and human behavior. It seems natural to me that human behavior could be relevant in asset markets, and I decided to pursue it as a research subject early on.
What fuels your research – what prompted you to research this area?
Curiosity - the desire to understand how different financial markets work, how they should work based on our understanding of the behavior of investors and managers, and which set of rules could make them work better. This understanding is extremely important for individual and aggregate welfare. I try find the right balance between my abilities and this desire when selecting research problems.
What inspires you to teach?
The initial inspiration was the desire to share the knowledge I had acquired and to emulate some of the great teachers I had. In addition, I value the privilege of assisting students in their journey and the possibility of having a small impact in their life. I also find it very rewarding when I can get students excited about a topic or a set of tools.
What’s the most interesting thing you’ve discovered through your research?
A recent project focused on an important regulatory question regarding Over-The-Counter (OTC) markets, where most of the world securities are traded. OTC markets are characterized by intermediation, meaning that when an investor wants to buy/sell a security, this investor first trades with an intermediary (a dealer), who then finds another investor to offload the security. The regulatory question is whether intermediaries should be required to make the prices of these transactions public. When prices are private, intermediaries can profit by misleading investors by pretending that they purchased an asset at a price higher than they actually did. Such misleading behavior is not actually illegal, thus resolving the issue falls on regulators. My authors and I show that disclosure increases investors’ welfare and improves market efficiency. Intuitively, disclosure leads investors to have greater confidence in financial markets, which increases their willingness to not only trade, but also trade at higher prices.
What do you believe is the future of your industry?
In general, we need a better understanding of how psychology impacts investors’ financial decisions and markets outcomes, and the feedback between the two. For example, investors’ decisions are (partially) driven by data, but the way investors interpret (and thus use) data seems to depend on both how the data is framed and on whether or not they experienced the events reported in the data. This will require building general frameworks of investor behavior guided by evidence from psychology and experiments. These frameworks will improve our understanding of when and why investors make decisions that appears to contradict standard economic theory, understanding that will then guide policies that will improve individual welfare. This approach can have a wide range of implications, from retirement planning to credit cards usage.
What are you most looking forward to in Vancouver?
Exploring the great outdoors in the area, traveling around the west coast (Yellowknife and Alaska are on top of the list), and improving my photography skills (cloudy days can actually be great for photos!).