Prof. David Byoung-Hyoun Hwang, Applied Economics and Management, said that while the reputation of financial work may be Wolf of Wall Street, most people in the trade are “the exact opposite.”
“In terms of finance’s reputation, you have these movies like Wolf of Wall Street — but most people in finance are really the exact opposite,” he told The Sun in a recent interview. “They are the nicest, kindest, most respectable people you’ll encounter.”
Hwang, who worked in management consulting and investment banking in Europe before deciding to take up academia at Cornell, said he hopes to emphasize the importance of ethics in finance in his classes, as unethical behavior can result from greed or lack of awareness.
Hwang grew up in a small rural German town and attended a Catholic school attended predominately by girls, later studying in Korea.
At his internship with the French cosmetics company L’Oreal, Hwang worked with 80 women and only two other men, he said, an environment in which he felt uncomfortable.
Hwang said that while he would “never return,” he can relate to efforts by male-dominated financial firms to recruit more women to foster a more gender-balanced workplace.
“It’s not so much to be politically correct, I think,” he said. “In finance, if a firm is primarily male, some females may not find that appealing and go somewhere else. And the firm loses out on a ton of talent that way.”
While Hwang argues that finance does not necessarily deserve a negative reputation, he emphasizes that the fact that finance receives more criticism than other areas is positive, because when people in finance “mess up, it really hurts.”
“It’s really important that we have finance, and smart people in finance,” he said. “Because of financial markets, I can take my money and invest it with someone smart, and help that person run a successful business. It’s a win-win for everyone. That person gets to run her own business and offer cool products. In return, I can expect to get my money back plus some healthy return.”
Everyone benefits from this transaction, he said, since the individual receives a financial return, the entrepreneur can pursue his product or service and, Hwang said, society benefits as a result.
Hwang’s research focuses primarily on behavioral finance. A portion of his work investigates the extent to which investor analysis and opinion shared on popular social media platforms can predict future stock returns and earnings surprises.
As people rely more heavily on social media for information, Hwang discovered that the blogs and websites where people review future stock performance of various companies demonstrate strong predictability.
“There are thousands of companies out there that are not covered by professional analysts,” he said. “One famous example is a Chinese firm that was listed in the U.S.”
“People didn’t really know what the company was doing,” he said, “so interested finance bloggers actually went to the manufacturing sites with their phones and checked to see whether there were actually trucks going in and out and wrote a report about that.”
This type of finance reporting is an instance of the “wisdom of crowds” — the power of collective opinion of a group of individuals rather than that of a single expert.
The unregulated nature of this reporting is controversial, since any individual can potentially purchase small shares of a less well-known company, write an unreliable report with false information to fool investors and bump up the stock press, and subsequently end up crashing the stock price, he said.
But Hwang said false reporting is rare, and the net effect of investor opinions on social media is positive.
“People will catch on to fake articles,” he said. “On the other hand, if you’ve written something about a company that later turns out to be true, you can become a super-star within the online community.”
“If I gain a track record writing articles, I’m going to get more followers and will get paid more,” he continued. “That may be an incentive for staying honest.”
Hwang also expressed interest in starting a project-focused course where the Cornell Dyson School students can participate in pro-bono consulting for New York City based finance firms, a type of hands-on experience he says would be valuable for Dyson undergraduates.
In his intro finance course, Hwang often reminds his students that a bad job experience can be valuable, because what “you don’t like provides you with perspective.”
“Many students, perhaps, in particular in business schools, have this notion that they must follow this set path,” he said. “They basically have their first five years after school mapped out. This seems dangerous.”
Hwang attributes this problem partly to the culture of banking recruitment. While many recruiters expect students to understand and have experience in the field of work for which they are interviewing, Hwang argues that a student’s curiosity and willingness to learn is often more valuable.
“I find it striking that even before taking their first finance class, I ask students what they want to do, and a lot of them say that they want to do investment banking, and then private equity or hedge funds,” he said. “Some students don’t even know what these are, they just hear that these are what make ‘successful’ careers.”
Students should be open-minded about their future career opportunities, Hwang says, and take classes in different areas to gain exposure and find where their greatest strengths lie.