Eighth Financial Mathematics Festival 24 — 25 February 2006 James J. Love Building Department of Mathematics The Florida State University

SCHEDULE OF EVENTS 24—25 February 2006

Friday, 24 February 2006

   3:00 p.m., 204 & 204B Love Building

Reception

Welcome, by Phil Bowers, Chair, Department of Mathematics

Message from Joseph Travis, Dean of the College of Arts and Sciences, by Sam Huckaba, Associate Dean

Fred Huffer, Department of Statistics introducing Dr. Nolia Brandt, President, Brandt Information Services, Inc.; Jim Moran Institute for Global Entrepreneurship, FSU

Alec Kercheval, Department of Mathematics introducing Stephen Lloyd Tabb , Director Investment Analytics, Office of Defined Contribution Programs, State Board of Administration Florida

Craig Nolder, Department of Mathematics introducing Dr. E. Robert Fernholz, Chief Investment Officer, INTECH

The Implied Liquidity Premium for Equities

E. Robert Fernholz

Over the long term, the returns on smaller stocks are likely to be higher than the returns on larger stocks. This phenomenon has been called "size effect", and a number of explanations have been proposed to account for it. We show that the difference in return between the larger and the smaller stocks can be accounted for by a liquidity premium for the smaller stocks, and we estimate the value of this premium using structural parameters for the capital distribution of the U.S. stock market during the 1990s.

Saturday, 25 February 2006

   9:00 a.m., 204 & 204B Love Building

Coffee, juice, muffins

Entrepreneurial and Small Business Needs

Nolia Brandt

The financial and analytical needs of small businesses (including one- or two-person consultancies) will be discussed, along with the difficulty small business owners face in obtaining knowledgeable assistance. A discussion of the economic impact of small businesses and how the Jim Moran Institute (JMI) at Florida State University's College of Business is assisting in the vitality and sustainability of those businesses. Anecdotes from case studies will illustrate the assistance needed and the importance of addressing those needs.

Short Break

It's Not Just About the Alpha: The Art of Investment Manager Selection

Stephen Lloyd Tabb

Seemingly few portfolio managers consistently out perform the market. As a result, index funds and ETFs are gaining favor amongst institutional and individual investors. Yet there are portfolio managers who can and do outperform their benchmarks and other portfolio managers over the long term. How do institutional investors-pension funds, endowments, insurance companies-select these managers? We'll examine some key metrics institutional investors use to separate the wheat from the chaff. More importantly, we'll discuss how to "get beyond" the numbers to obtain a qualitative level of comfort regarding the managers' ability to handle risk and uncertainty. We'll demonstrate how these approaches can be applied by individuals in selecting mutual funds to assist in meeting their own investment objectives.

Jobs!

Information for students about jobs in the sector. Q/A.

Dr. Fernholz , Dr. Brandt and Mr. Tabb will be joined on the panel by

Dr. William Boyce , Salomon Bros (retired), Bell Labs (retired)

Mr. Jack Madden , FSBA

Mr. Ken Hill (FSU master's, Financial Mathematics), FSBA

Cooperating Departments are: Computer Science, Economics, Finance, Mathematics, Risk Management, and Statistics.   FSU faculty members from six departments in three colleges developed this program and guide the students. A group of FSU graduates and others who work in the financial industry also advise the program which is resident in the Department of Mathematics of the College of Arts and Sciences. Graduate study in Financial Mathematics and a listing of participating faculty is described in the Guide to Financial Mathematics at Florida State University

There is a faculty Steering Committee from the participating departments and a graduate advisor from each of the departments who works with the program students and facilitates scheduling. Financial Sector Advisors are Larry Abele (Auriel Capital), David Barge (Florida Power and Light), Raffael Clerici (H.B.Fuller), Lisa Goldberg (Barra, Inc.), Benoit Montin (Murex), Steven Perfect (Florida Power and Light), Edward Qian (PanAgora Asset Management), Ray Song (Branch Banking and Trust), David Villa (Florida State Board of Administration), Dan Waggoner (Federal Reserve Bank, Atlanta), Jay Webb (UBS), and Anjun Zhou (State Street Global Advisors).

Thanks for planning cooperation from faculty and staff, and financial support to make this event possible from the Department of Mathematics and Dean Joseph Travis of the College of Arts and Sciences.