Philip H. Dybvig

Teaching - Research - Vitae - About Me - Contact - Olin School - Wash U - Humor

with Terra Cotta Warriors I took time off to see the Terra Cotta Warriors when I participated in the China International Conference in Finance in Xi'an, China in July, 2006.

Welcome! This is the home page for Philip H. Dybvig, Boatmen's Bancshares Professor of Banking and Finance at the Olin School of Business at Washington University in Saint Louis.

Disclosure Regulation When is it useful to allow managers to forecast earnings and make other forward-looking announcements? Nina Baranchuk of UT-Dallas, Jun Yang of Indiana, and I have written Renegotiation-proof Contracting, Disclosure, and Incentives for Efficient Investment, a paper that uses a new conceptual framework to analyze this and other questions about how disclosure should be regulated. We find that compensation is crucial: allowing forward-looking announcements is beneficial if revealing useful information is rewarded by the manager's all-in compensation, including not only salary but also bonuses, current and anticipated stock and option grants, future career opportunities, etc.

Well-diversified? Does the power of diversification preclude superior performance by active managers with large portfolios? In a new paper, The Fallacy of Large Numbers, it is shown that there is no logical inconsistency between superior performance and holding a large, well-diversified portfolio. This paper was presented as a keynote address (associated slides) for the meetings of the Midwest Finance Association in Saint Louis, Missouri.

Arbitrage Steve Ross of MIT and I have written the working paper Arbitrage, State Prices and Portfolio Theory, which gives an introduction to advanced concepts in investments at a level that is appropriate for advanced undergraduates or beginning doctoral students in finance. The focus is on the economics; the presentation uses single-period models that are less challenging quantitatively than continuous-time models. The paper is to appear as a chapter in the Handbook of the Economics of Finance being edited by George Constantinides and René Stulz.

Thanks to the volunteers and participants who made the 2002 Annual Meetings of the Western Finance Association (WFA) a great success! I was Program Chair for the meetings held in Park City, Utah, June 23--26, 2002. Most of the 120 papers presented at the meetings can be viewed from links in the on-line program. Following my service as Program Chair, I was President of the Western Finance Association, an international organization with membership open to institutions and individuals from the academic and professional communities. As Past President, I selected the site of the 2005 meetings (Portland, Oregon) and I served as the chair of the Nominating Committee, completing my duties.

Reload Options Reload options are compound options that are increasingly popular in executive compensation. Exercising a reload option by tendering shares at market value gives the holder the usual call payoff plus a grant of additional options. Mark Loewenstein and I study reload options in our paper, Employee Reload Options: Pricing, Hedging, and Optimal Exercise, which appeared in the Review of Financial Studies.

Cash-balance pension plans Cash-balance plans are so-called ``hybrid plans'' that have the look-and-feel of a defined-contribution plan but are regulated like defined-benefit plans. Dave Brown, Bill Marshall, and I have published an applied paper The Cost and Duration of Cash-Balance Pension Plans in the Financial Analysts Journal, that analyzes the feature of the liabilities represented by these plans. These liabilities have an effective duration much shorter than some people have assumed.

Bank Runs! The Quarterly Review of the Federal Reserve Bank of Minneapolis has devoted its Winter 2000 issue to my 1983 article (132K PDF) with Doug Diamond on bank runs. Our original article showed why banks are fragile and subject to runs and how this is related to banks' ability to create liquidity. It also showed how deposit insurance can prevent bank runs by removing depositors' incentive to withdraw their money.

Theoretical publications Recently, two of my joint theoretical papers have appeared in the Review of Financial Studies. In ``Empty promises and arbitrage'' (224K PDF) Greg Willard and I explore the behavior of security prices when agents have fundamental disagreements in beliefs. In ``Portfolio Turnpikes'' (320K PDF) Chris Rogers, Kerry Back, and I generalize some traditional results on long-horizon portfolio choice, while calling into question the traditional arguments about how these results apply to practical problems. See my research page for recent working papers.

Asset allocation for university endowments Of more general interest, my article, ``Using Asset Allocation to Protect Spending'' appeared in the January/February 1999 issue of the Financial Analysts Journal. This article was written in connection with the Common Fund Prize that was awarded for my research on the connection between asset allocation and spending policy for university endowments. I invite you to view the article (205K PDF), or you can use a java applet to simulate the strategy and compare it with more traditional asset allocation rule.

Graham and Dodd scroll Bill Marshall and I have been awarded a Graham and Dodd scroll for excellence in financial writing. The prize was awarded for our article ``Pricing Long Bonds: Pitfalls and Opportunities,'' which was published in the Financial Analysts Journal. Risk Management You may also be interested in our newer publication (102K PDF), ``The New Risk Management: The Good, the Bad, and the Ugly,'' which appeared in the St. Louis Fed Review.

Wash U Olin School Home Page
Finance Seminar Series
Ohio State's Index of finance faculty Web sites at different schools
Ohio State's Financial Data Finder
Review of Financial Studies Online
Washington University Libraries
Olin School Kopolow Business Library
JSTOR (academic articles online)
NCSA (at UIUC) Beginner's Guide to HTML
personal web site

Note: ``teaching'' and ``research'' are both part of learning! I invite all visitors to visit my Teaching and Research pages.

Hobby section

Perhaps you would like to learn Taijiquan

Tui Shou with Zhang Shengping Zhang Shengping of Beida (Peking University) and I play taiji tui shou (push hands) in the lobby of a seafood restaurant in Beijing.

Chess! I have been learning to play chess. If you would like to play chess online, I recommend the Internet Chess Club.

Internet chess club banner

Scanned and processed images courtesy of Megan P. Dybvig