Paper of 2015: Prof. Hugh Kim’s Awarded Research Reveals Secrets behind Investor Inertia
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- 2015-12-22
December 22, 2015
By: Marvin Ma; PR Committee of SKK GSB
In his third year’s teaching and researching at SKK GSB, Dr. Hugh H. Kim recently won the Top Journal
Paper Award from Korea-America Finance Association (KAFA), an academic group consists of scholars
from top universities and research institutes in Korea and the U. S. The paper was also accepted by Journal
of Financial Economics, one of the world’s top 3 finance academic periodicals, reaffirming its high quality
in research and contribution to academic world. The Top Journal Paper Award is an annual award granted
to outstanding research paper and its author by KAFA.
The study, titled “Time is Money: Rational Life Cycle Inertia and the Delegation of Investment
Management,” provided a creative and provable explanation to “investor inertia,” a puzzle in finance
research for years indicating the seemingly irrational investing behavior of investors as they spend less or
no time actively managing their investment portfolio.
Dr. Kim and his co-authors, Dr. Raimond Maurer, Professor from Goethe University and Dr. Olivia S.
Mitchell, Professor from Wharton School, University of Pennsylvania, developed a calibrated dynamic life
cycle portfolio choice model accounting for the apparently irrational inertia behavior by incorporating the
fact that investors must forego acquiring job-specific skills when they spend time managing their money,
and their efficiency in financial decision making varies with age. People may optimally choose between
actively manage their assets versus delegating the task to financial advisors instead.
“People may elect optimally not to touch their investment portfolio for a long time because actively touch
their portfolio may incur a huge time cost. The time spent on portfolio management could have been spent
better on building up human capital in their job skill,” said Kim.
Dr. Kim, the first author of the paper, currently an Assistant Professor at SKK GSB, joined this Korea’s
best business school 3 years ago.
The research not only provided rational explanations for an “irrational” behavior but also opened a new
door to further researches. Additionally, the idea may also be applied to different field like other decision
making process that may involve people’s behaviors on time allocation and cost.
Balance between teaching and researching
In fact, the research itself somehow illustrates part of a hardworking young professor’s life when dealing
with heavy-loaded teaching tasks and research projects where both of them need a great deal of time to be
accomplished.
Dr. Kim was in charge of several core courses of SKK GSB, teaching foundational knowledge to a group
of students who are diversified in age, background, levels of English, and so on. While students’ age range
can be 20s to 50s and academic background from top business undergraduate major to art and music major,
teaching can be a much more complicated thing than just delivering knowledge by standard lectures.
Dr. Kim admitted it is a challenging task. “When I teach EMBA students who are with more experience
and with their own understanding of life, textbook cases for them will usually get feedback like ‘this is not
the real world works.’ Instead of teaching, I’d rather help let them talk and get to the answers by
themselves.”
Given the heavy teaching task, the other part of a professor’s professional life, research, becomes even
more challenging while time is never enough in such a busy life. For Dr. Kim, he agreed the difficulty to
find enough time to do both teaching and researching well, but he said that he has tried his best to find a
way to synergize both and to create best outcome.
After achieving an obvious great balance by winning a top research award while teaching one of the most
heavy-loading course, Dr. Kim will keep his academic life balancing and synergized by further extending
his research to different topic.
“Historically, major finance theory has been focusing on the monetary cost and value,” he said. However,
his interests lies on the non-monetary cost and value on financial decisions. He has done the paper
regarding the time cost of investment management. “In my future research, I may work on the cognitive
cost of financial management.”
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