Essays before sleep 7 Paper Readings

Though there will be an exam on Thursday, I continue to read some papers this day. This is the first time I spend so many times reading articles on journals in graduate school and I hope I can continue this trend.

Today I have just read some articles on Journal of Finance, which is the top one journal in finance industry. I believe I should only read the articles in top journals so that I can learn the latest skills and ideas in economics and finance study. As we all know the first year Ph.D. student has the fewest resources and capability on the paper market. We had better learn with a question rather than textbooks. This method can not only stimulate me continuous thinking but can help learn materials from different aspects as well. Today I have read Dr. Zhiwu Chen’s paper on the strange performance of some options. In his article, it is observed call option may not move in the same directions of the underlying security while put option may not always be the opposite. Thus we can conclude option is not a redundant security that can be simply reproduce by underlying security and risk free bonds. Actually option is just a security that concentrates mainly on the volatility of the underlying stock and supplies additional trade or arbitrage opportunity for investors. That is an excellent idea and consequently Dr. Chen’s paper is accepted by JoF without extreme complicated mathematics deduction. By the time, Dr. Chen opens a hedge fund after 2000 and concentrates himself on the management of this fund. Many students in Yale complain Dr. Chen only uses slides in the classroom and offers little help to their future career. Maybe the business school only pays him 300k per year while he can earn 10m in his hedge fund each year. It must be a huge gap.

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