2014 Texas Tech Integrated Scholar
I. Wylie and Elizabeth Briscoe Chair in Finance
Area Coordinator in Finance
Professor of Finance
Rawls College of Business
As an Integrated Scholar, Rawls College of Business professor Jeff Mercer brings his scholarship and financial expertise into the classroom—for the benefit of his students as well as the broader university. Mercer’s research interests cover investment and risk management, and derivative securities. His research has a national reach among professionals. It also complements the subject matter of his undergraduate and graduate finance courses, chief among those being the Student Managed Investment Fund (SMIF) offering. Through SMIF, Mercer and his finance students manage a $2.5 million stock portfolio for the Texas Tech University Foundation. Mercer's students have been solely responsible for the fund’s performance, which affects scholarships, professorships and awards. A hands-on approach in the classroom has earned Mercer numerous accolades, including the TTU President’s Excellence in Teaching Award in 2006 and as a two-time honoree of the college’s Lockheed Martin Excellence in Teaching Award (2006 and 2011). Mercer holds the Briscoe Chair in Finance, in addition to serving as area coordinator in finance and director of the Institute for Banking and Financial Studies. He has received research awards from major foundations in finance, and his service contributions include co-editing the Journal of Financial Research and reviewing articles on an ad hoc basis for numerous journals. Outside the SMIF trading room, Mercer is a partner in Lubbock investment advisory firm McDonald Capital Management.
Learn more about Integrated Scholar Jeff Mercer in this question-and-answer session.
What are your research objectives and interests?
My research interests generally deal with various aspects of investments and asset pricing (or valuation). Broadly, much of my research attempts to explain why we observe the level and variability in returns on various (investment) asset classes that we do in fact observe over time. Forecasting returns on stock indexes, for example, is difficult. Furthermore, it is difficult to explain what drives differences in returns across the stocks of various firms over time. Yet these are important elements one needs to consider when making investment decisions... how risks are rewarded, or not, and how we can improve investment performance through understanding the drivers of value and returns.
How do you feel your research impacts the globe?
In reality, my research probably has little or no global impact. That’s a tall order. But it might have some impact on the world of investing. My research has been published in numerous scholarly and “practitioner” outlets, and at least a couple of the practitioner outlets that I publish in are read by tens of thousands of investment analysts and advisers whose practices impact asset pricing and the way investment decisions are made. These decisions, in turn, impact global markets and investment performance.
What types of service projects have you been involved with?
My service projects have been oriented toward helping students and young finance professionals understand the importance of and achieve the gold standard among investment professionals, that being the Chartered Financial Analyst designation. The primary reason I focus on this is because of its laser focus on high standards of practice and the necessity for ethical integrity.
What are you currently working on?
I’m a journal editor, so that takes a good bit of my time. Beyond that, one particular project I’m working on now with a Ph.D. student explores the efficacy of investing in stocks on margin (borrowing money to buy stocks). The project is motivated by two strands of research. The first is the existence of an empirical puzzle in the field, showing that historically, returns on stocks have been “too high,” given the actual risks one faces by investing in them, and “too high” relative to returns on risk-free assets like U.S. Treasury securities. The second is evidence showing that the returns to many asset classes are linked to U.S. monetary policy. Pulling these two strands together provides the intriguing possibility that we might find that investing on margin historically would have provided substantial risk-adjusted investment benefits.
Where do you find your inspiration?
Broadly, my inspiration comes from the three F’s... faith, family and friends. Professionally, I’m inspired by many things... the dovetailing of the practice of investment management with the scholarly side, intellectual curiosity, my students (with whom I could not have competed when I was their age!) and my colleagues (most of whom are easily as “integrated” as I am).
What advice do you have for new faculty members about balancing the components of Integrated Scholarship—teaching, research and service—in their careers?
My advice would be just that—try to find a reasonable balance between teaching, research and service (and I would add the fourth dimension of “practice,” meaning contact with practitioners in the field). We all know that the demands of tenure to produce high-quality research in your first several years can cause myopia. But the reality is that the most valuable faculty members to all stakeholders of the university are those who bring all dimensions to the office every day. Emulate these integrated scholars.
I was pursuing industrial engineering, which at the time meant one would take business courses and engineering courses at the same time. I happened to take an elective course in investments, and I was hooked (besides, my thermodynamics class was making my head hurt).
B.S., Finance, University of Wyoming (1986);
M.S., Finance, Texas Tech University (1987);
Ph.D., Finance, Texas Tech University (1992)