When U.S. Federal Reserve Chairman Ben S. Bernanke stated before Congress on May 22 that the Fed might taper the bond-buying program known as quantitative easing, Wall Street bristled. When he confirmed the plan at the Fed’s June 19 meeting, the Street's reaction was swift and protracted. In one five-day period shortly after the news, the Dow dropped 659 points. Then in September, when financial news networks aired stories that the Fed decided not to go that route, the markets took off.
For investors, it was a gut-wrenching rollercoaster ride. For Stonehill Economics Professor Hossein Kazemi, it was a gift — the kind of dramatic event that helps him show his students how the theories and concepts they study in his “Impact of News on Financial Markets” Learning Community play out in the real world.
“I tell my students, ‘These are not theoretical examples. This is not fiction. This is real. This is happening now in front of your eyes,’” he said. “The idea is to show students that what we teach them in the classroom relates to real world. The skills they learn are the tools of the trade that are used in the daily life of investors, bankers, CEOS, or individuals who may want to finance a home or invest.”
In Kazemi’s classroom, students take what they’ve learned in their textbooks and simultaneously see those concepts playing out in real time in a room with data from Bloomberg terminals projected on multiple screens and a Flat-screen TV airing CNBC and Bloomberg TV news.
Concepts and theories come to life
Learning Communities at Stonehill combine two related topics and explore common themes. In this case, the two components are Kazemi’s Economics class on Macroeconomic Principles and Professor Martin Konan’s Business course on Corporate Finance.
“By its nature and design, this Learning Community embodies Stonehill’s commitment to making classwork relevant to ‘real world’ events,” said Konan, whose corporate finance component focuses on such fundamentals as the time value of money, the structure of financial markets, yield curve and term structure of interest rates. “The course combines theory and real world applications. (It) ties the tools of finance and economics to the latest news, as it arrives.” Students learn to apply the tools of finance and economics in their textbook to analyze the impact of macroeconomic data releases, business and financial news, and domestic and global political news on U.S. financial markets.
The news impacts financial markets in two ways, Kazemi explained. “The first is when we anticipate news. If I anticipate something will happen in six months, I make my move now in anticipation of its occurrence.” The second way is instantaneous, which is what the students see projected on the screen. “In September, when the Fed decided not to (taper quantitative easing), the markets took off,” he says. “So the markets behaved in a rational logical manner in response to the news.”
Gaining economic confidence
Students in the LC said Kazemi and Konan have helped them make sense of the stock market.
“Everything I’m learning my LC can be applied to real life in some way,” said Katherine Wallace, 19, a Marketing major and Entrepreneurship minor from Bernardsville, N.J.
Classmate Kathryn Merrill, an Accounting major from Naples, Maine, adds that since taking the LC she feels more confident that she “can have sophisticated, intellectual conversations with (professionals) in the business world.” And Economics major David Gorey said seeing the examples in class “helps to illustrate how investors react to news stories, and helps (me) with investment decisions for the future... and to better manage money later on in life.”
A proven roadmap to success
Students who have taken Konan’s and Kazemi’s LC have gone on to work at some of the most powerful firms in the world — including Goldman Sachs, Morgan Stanley and Bloomberg— and to even train investment firms how to use Bloomberg in their daily business.
“We’re giving them the ammunition they need for real-world success.” said Kazemi. “Former students go for job interviews, and people call me and say, ‘Wow! Do you have any more like her?’ Because of their preparation, our Stonehill students are getting better internships; they’re getting access to better jobs; they’re getting access to better grad schools.”
Lauren Daley is a freelance writer. Contact her at email@example.com.