Tag: Faculty

At a time when evictions and mortgage defaults have been likened to an oncoming tsunami across America, a big-data study of loan-to-value ratios in the wake of the 2007-08 recession carries a cautionary forecast for vexing economic weather ahead:

The higher a worker’s outstanding mortgage relative to their home value, the worse their future income growth and job mobility.

Those were the key findings when four researchers, including two from Washington University in St. Louis’ Olin Business School, delved into the wage data and credit profiles encompassing 30 million Americans across 5,000 companies. They found a negative relationship between workers’ income and their home loan-to-value (LTV) ratio, especially when the home was underwater (higher principal owed than value).

For example, the scientists discovered that people with underwater mortgages earned $352 — or 5% — less monthly than workers with less mortgage debt relative to home values.

Compounded by credit and liquidity issues, these workers are virtually stuck, unable to move to a job with a better income or a new area, the researchers wrote in their study forthcoming in The Review of Financial Studies.

And it could well translate to the COVID-19 economic effects today.

Radha Gopalan

“The impact of the current crisis on local economies varies widely across the U.S.,” said Radhakrishnan Gopalan, professor of finance at Olin and study co-author. “Our study highlights the difficulties someone in a worse-affected area may face in trying to pack up and move to a less-affected region. Furthermore, our study also highlights an important cost of homeownership: For instance, buying a home will constrain your labor mobility, and in the long run that may adversely affect your labor income.”

“This is one of the first studies to tie detailed credit histories to information on worker mobility and pay increases,” added co-author Barton Hamilton, the Robert Brookings Smith Distinguished Professor of Economics, Management & Entrepreneurship and director of the Koch Center for Family Business at Washington University. “Prior work has analyzed these factors in isolation and has not made the connection between the two.”

Bart Hamilton
Bart Hamilton

Seeking ways to scrutinize the effect of home equity and labor income, in addition to the mechanisms intertwined, the researchers used Equifax information and Corelogic house-price indices to drill down to study a random sample of 300,000 workers with an active mortgage over a 72-month period earlier in this decade.

They measured home equity as LTV — the unpaid mortgage vs. the market value — on the workers’ primary residence. They additionally accounted for home-value increases/decreases using ZIP-code level price fluctuations and controlled for local economic conditions. Moreover, they contrasted the income path of homeowners versus renters who worked at the same firm, were of a similar age and job tenure, and held a similar level of income and non-mortgage debt.

What the data essentially showed: Homeowners facing high LTVs were less likely to change homes, but more likely to change jobs, if they could. And renters working at the same companies and with similar job tenure faced no such issues. Additionally, homeowners with high LTVs faced slower income growth while renters faced no such penalties.

It wasn’t as cut and dried as a rent-vs.-own debate, though. Income and mobility for homeowners could vary. A worker could face relatively smaller income declines or find greater employment opportunities if they lived in a metropolitan area with more jobs — for instance, an IT worker in San Francisco/Silicon Valley — or a state with softer non-compete laws limiting movement within an industry.

Housing prices and wages

Still, they found that declines in housing prices as a result of that 2007-08 recession suggested a 2.3% reduction in monthly wages economy-wide due to constrained mobility.

“If the adverse effects of the current pandemic on local economic conditions also spill over to house prices, then we will find ourselves with a number of underwater homeowners,” Gopalan said. “In that scenario, the effects we document will be very relevant.”

Gopalan and Hamilton were joined in the research by two former Olin PhDs, Ankit Kalda and David Sovich, who work at Indiana University and the University of Kentucky, respectively.

They wrote that a homeowner with an underwater mortgage were to face a new job offer in a different area, they were confronted with three (unappealing) prospects:

  1. Sell and swallow the shortfall — meaning they still must require some access to liquidity, despite being credit constrained.
  2. Retain the home and rent it out — meaning there will be no or negligible down payment on a new home in the new area.
  3. Walk away and default on the mortgage — meaning deeper credit issues.

In short, their mobility was as hampered as their current job situation, the co-authors said. A worker may not seek out better opportunities in the first place and, consequently, feel adverse effects on income because of an undermined bargaining power at the current workplace.

For the record, the median individual in their study group was 41 years old with an annual $41,015 salary; comparatively, the median person in the U.S. workforce overall in that time window was 41.9 with an annual $41,392 income, the co-authors wrote. The median loan: $192,400.

“Our study highlights an important cost of home ownership,” Gopalan said. “While the ‘American dream’ is usually defined in terms of building wealth through home ownership, the financial crisis has revealed a few glaring holes in this story. Our study formally quantifies one important cost of following the ‘American Dream.’ A relatively safe way to own a house is to make sure one has sufficient down payment or home equity so that even if house prices fall, one is not stuck with an underwater mortgage. To this extent, our study recommends caution in pushing mortgages with less down payment.”

Hamilton added: “Our study highlights that policies affecting financial markets can directly impact the labor market as well. Businesses also need to be aware of the indirect costs that credit markets and home ownership may impose on mobility and the optimal allocation of their workforces.”

Professor Andrew Knight teaches a hybrid course in Emerson auditorium. In front of him, socially distanced students site in the auditorium, while behind, students participating remotely appear on screen.

With masked faces and generous applications of hand sanitizer, WashU Olin students, staff and faculty members began a fall semester unlike any other on September 14. Students settled into larger-than-usual classrooms (to maintain physical distance) while instructors in face shields stayed within carefully demarcated boundaries at the front of the rooms.

In spite of a world turned topsy-turvy by the coronavirus pandemic, Olin welcomed 121 faculty who started teaching 207 courses over 427 sections. A third of those classes were delivered fully online—because their large enrollment required it—while the rest were either small fully in-person classes or hybrid classes.

Hybrid courses required subsets of the enrolled students to come physically to class some days and participate online other days.

“I was definitely apprehensive about the idea of a hybrid classroom—as well as any type of in-person component, given the circumstances,” said Sydney West, BSBA ’24. “But after my first in-person class, I’m honestly so impressed with how adaptable we are. It’s new to all of us and definitely feels strange, but it seems everyone is generally just grateful to be back in the classroom.”

Sydney West, BSBA '24, on the South 40 during her first week at WashU Olin.
Sydney West, BSBA ’24, on the South 40 during her first week at WashU Olin.

Quick prep for hybrid classes

For months, instructors prepared to teach online or hybrid classes in collaboration with Olin’s Center for Digital Education while Olin’s staff developed a system to hire, train and schedule “engagement moderators” for each hybrid class, serving as an in-person proxy for students participating through Zoom by monitoring the chatroom and asking questions aloud in the classroom.

In fact, as student hiring ramped up in the first week, dozens of Olin staff members stepped in to serve as engagement moderators. Paulo Natenzon, assistant professor of economics, was thrilled with how his hybrid course went in the first week.

“I’m really happy with how it came out. But I also realize I have many people to thank for that,” he said, crediting Andi McLaughlin, CRM analyst in marketing & communications, for “saving the day at least three times.”

In the first week, 20 students and 42 staff members served as moderators. By the second week, staff had hired enough students to flip the ratio: Of the 76 moderators scheduled, 59 were students and 17 were staff members.

As classes continued, Olin professors adjusted to the reality of teaching courses to students both physically present and “virtually” attending. “Admittedly, I’d love to have more online student interaction. Perhaps the pace of the class makes it challenging to type in a comment before I’ve called on someone,” said Staci Thomas, lecturer in communication and interim director of the management communications center. “I’ve also discovered that breakout rooms need more time to work together than in-person students do.”

Choreographing a new way of learning

Since before the spring semester closed in May, planning had begun for a late start to the fall semester. Those plans included decals and directional signs regulating the flow of people in and out of buildings, a detailed breakdown of available space to maintain physical separation in classrooms and study areas and a comprehensive communication plan to ensure everyone knew what to do, how to do it and when it had to be done.

Olin’s work dovetailed with extensive planning at the university level to align with public health guidelines and provide resources for students when they were on campus.

Jian Cai, lecturer in finance, reflected on how lovely the campus looked in the first week and how welcome the sight of students was.

“The weather was perfect for the first week and the school is in great order,” she said. “Students follow rules very well, from social distancing, cleaning, to entry/exit protocols. They are engaged in the classroom interacting with me. Overall, communication with students flows smoothly.”

And though she was nervous about starting her first classes under the new pandemic-inspired circumstances, she felt well prepared.

Just like it was planned

“Things instructors needed to set up in classrooms worked exactly as I learned in the training sessions,” she said. “I am really touched and thankful to have our staff members facilitate the running of hybrid classes as engagement moderators.”

Tyler Edwards, MBA '21, in a class during the first week of fall 2020, masked up and socially distanced.
Tyler Edwards, MBA ’21, in a class during the first week of fall 2020, masked up and socially distanced.

The first week ended with the first weekend for the next class of Executive MBA students. The 36 students gathered for their classes at the Ritz in Clayton in order to keep the population density as low as possible on the main Olin campus. They are also the first to participate in Olin’s EMBA since a reboot of the program focusing on values-based, data-driven decision-making, digital transformation and leadership development.

Anecdotally, students across the board have offered good feedback about how the semester began. “This first week back was a whirlwind, but of the good sort,” said Tyler Edwards, MBA ’21.

“More than ever,” Cai said, “I feel the close connection within our community, and I am proud to be part of it.”

Pictured above: Professor Andrew Knight teaches a hybrid course in Emerson Auditorium. In front of him, socially distanced students sit in the auditorium, while behind, students participating remotely appear on screen.

A.N. Sreeram and Dr. Clive Meanwell

The one American company that is the most innovative, the most effective at research and development, of the five most attention-grabbing US-based companies isn’t one that’s developing your cellphones, creating your home tech devices or delivering goods to your door.

Prof. Anne Marie Knott

Rather, it’s one you watch: Netflix.

The 2020 Research Quotient Top 50 (RQ50), highlighting the most innovative US companies, was unveiled September 18 at The Industrial Innovation Path to Economic Recovery Conference hosted by the Boeing Center at Washington University in St Louis.

A recent paper, forthcoming in the Journal of Financial and Quantitative Analysis, finds that RQ is the only innovation measure that reliably predicts market returns.  That paper was co-authored by Michael J. Cooper of the University of Utah, Wenhao Yang of the Chinese University of Hong Kong, Shenzhen and  Anne Marie Knott, the Robert and Barbara Frick Professor in Business at WashU Olin, who pioneered the RQ measure.

The conference attendees, in an online audience poll, predicted Amazon would prevail as the most innovative among the FAANG notables: Facebook, Amazon, Apple, Netflix and Alphabet (formerly Google). In addition to unveiling the new list, Knott, at the Boeing Center/Olin conference, oversaw a panel discussion with two “RQ50 Hall of Famers”—firms that have been in the RQ50 for 10 or more years: A.N. Sreeram, Senior vice president and chief technology officer of Dow (20 years in RQ50), and Dr. Clive Meanwell, founder of The Medicines Company (10 years in the RQ50), whose company became ineligible for the RQ50 after being acquired by Novartis last year.

Keys to research investment success

Knott pointed out it was interesting to hear their discussion echo what her RQ scholarship has found: The keys to successful innovation, even in this instance for a 123-year-old company and a biotech startup, are not all that different.

“Keeping secrets is overrated. If you don’t collaborate and share IP, you’re highly unlikely to develop anything of great use.” 

Dr. Clive Meanwell

“How can you build wisdom faster?” asked Sreeram. “Make research available to innovators.”  He noted that every research report conducted at Dow since 1934 is fully digitized and available to researchers at the firm today. Sreeram praised such information sharing as an effective means of facilitating wisdom and learning, even among expert-level professionals. 

The RQ50 session was part of the five-session conference that received national attention after it opened with a fireside chat that Olin Dean Mark P. Taylor hosted with St. Louis Federal Reserve Bank President James Bullard, who characterized the new debt associated with COVID-19 interventions and offered his perspective on lifting inflation. This set the stage for a series of discussions to understand how best to invigorate technological change to spur economic growth sufficient to handle the debt.

Research versus innovation

While many argue this is best accomplished by increasing research, which takes place predominantly at universities and government labs, the conference focused attention on innovation—converting research into products and services that people want to buy. The latter takes place in companies, where 70% of U.S. R&D is conducted.  

Recognizing that companies can’t drive growth themselves, the conference included a panel discussion with three investors known for their long-horizon approach: Michelle Edkins, managing director, BlackRock Investment Stewardship; Penny Pennington, managing partner, Edward Jones; and Jared Woodard, director for global investment strategy, Bank of America. The panel was moderated by Todd Milbourn, vice dean of faculty and research and Hubert C. & Dorothy R. Moog Professor of Finance.

Woodard spoke to the importance of R&D and the RQ metric.

“One of the things that has become incredibly important in a world of low-economic growth, low-interest rates and low profits is the ability to find companies that can use R&D and capex [capital expenditure] dollars efficiently,” Woodard said. “And I think RQ is a great example of one methodology for finding those kinds of firms.”

“We’re always talking to the boards and management of companies about long-term challenges and opportunities and that includes R&D and capex,” Edkins added. “We are seeing COVID-19 accelerate macroeconomic trends key to R&D.”

Pennington mentioned the importance of efficient R&D over long-investing horizons in any environment and the imperative to identify firms whose R&D drives “return on investment in excess of the cost of capital,” characterizing that search as a “fundamental root of serious long-term investing.”

Emerging research on innovation

The conference also included a session of emerging academic research which offered an evidence-base for what innovation strategies and polices work, and which don’t. Participants included: Chad Syverson, University of Chicago, “Product Innovation, Product Diversification,and Firm Growth: Evidence from Japan’s Early Industrialization;” Florian Ederer, Yale School of Management, “Killer Acquisitions;” and Willy Shih, Harvard Business School, “Some Attention to the Demand Side, Please.”

While companies invest 70% of some $580 million invested in US R&D, the government is the next largest source of such funding—22%. In a closing keynote talk, Knott guided a discussion with Jaymie Durnan, director of strategic initiatives at Lincoln Lab, focusing on how those funds could be better spent. Moreover, Durnan discussed what government policies might drive more growth from R&D.

In the end, the audience met in breakout rooms to synthesize insights gleaned across the sessions to generate actionable recommendations to increase growth from innovation and thereby emerge from the pandemic in better shape. These insights and a conference report will be available on the Boeing Center’s LinkedIn page.

New research shows consumers strongly prefer “natural,” not synthetic, products to prevent ailments.

Which presents a dilemma. Medical researchers are racing to create a vaccine for COVID-19. When they do, how receptive will consumers be?

Vaccines are far from “natural.”

“Vaccines are technically a treatment to prevent an ailment,” said Sydney Scott, Olin assistant professor of marketing. “Moreover, vaccines are unnatural insofar as humans create and alter them. Some people refuse vaccines as a preventative measure, preferring not to ‘interfere with nature.’”

Sydney Scott

As the world anxiously awaits a COVID-19 vaccine, however, perhaps consumers will view it as a curative for a societal problem, Scott said.

“Our research suggests that if consumers view a vaccine more like a curative to the epidemic, rather than as a preventative for the self, they will be more receptive toward it.”

Scott, an expert in consumer behavior and decision-making, is the lead author of “Consumers Prefer ‘Natural’ More for Preventatives Than for Curatives,” forthcoming in the Journal of Consumer Research.

Consumers’ beliefs

Consumers believe that natural products are safer and less potent than synthetic alternatives, the research found. And they care more about safety and less about potency when they’re trying to prevent problems.

“This research sheds light on when the marketing of ‘natural’ is most appealing to consumers,” Scott said.

Consumers often prefer natural versions of foods, medicines, personal care products and home products, according to the paper. “Natural” isn’t a legally defined and regulated term, but consumers’ definition is that a product has no additives and that humans haven’t tampered with it.

“This preference for natural is an increasingly important driver of consumers’ decisions,” Scott said.

Insulin, antibiotics, cortisone creams

In some cases, however, consumers abandon their preference for natural.

For example, people widely accept insulin, antibiotics, cortisone creams and synthetic stain removers, although they are evidently unnatural, according to the paper. “Thus, anecdotally, the preference for natural products looms larger in some situations than in others.”

The researchers focused on the relation between consumers’ judgments about naturalness and their beliefs about two important attributes—safety and potency. They examined when consumers prefer natural most strongly and why the variance in preference for natural occurs.

“Consumers widely desire natural products, but not always to the same degree,” Scott said. “We demonstrate that the preference for natural is particularly strong when consumers are preventing problems or illnesses compared to when they are curing the same problems or illnesses.”

Scott and coauthors Paul Rozin and Deborah Small, both of the University of Pennsylvania, present seven studies. One showed that consumers more strongly prefer the exact same natural product when preventing an ailment than when curing it. Another showed consumers search for and chose natural products to prevent versus treat cold symptoms.

Another, which examined consumers’ reports about their health choices over a year, found consumers prioritize naturalness in their preventative treatments more than in their curative treatments. And another showed that when consumers believed natural products were riskier and more potent than synthetic products, they preferred natural products for curing.


The research was developed with a focus on individuals making decisions for themselves among multiple treatment options (some natural, some synthetic). But the emergence of the COVID-19 pandemic raises important questions about the implications—and future directions—of their research.

For instance, the authors ask, do pandemics induce a macro-level version of a curative mindset?

“In other words, society may conclude that there already exists a problem (a widespread ailment) that needs to be cured, thereby placing more importance on potency relative to safety,” they write.

Relatedly, consumer acceptance of a prevention for pandemics and epidemics might be affected by the contagiousness of a disease, severity of a disease, scarcity of treatment options, and novelty of and lack of knowledge about the threat. And each might have downstream consequences on safety/potency tradeoffs consumers are willing to make.


The paper makes several contributions. “Our primary contribution is to provide an organizing principle for explaining when consumers prefer natural products,” the authors write. The prevent/cure distinction explains variation in the preference for natural

  • across distinct product categories such as food and medicine,
  • within product categories such as different types of medicine,
  • and for the same product depending on whether consumers used it to prevent or to cure ailments.

“In doing so, our research not only generates new predictions, but also helps unify past descriptive findings under one theoretical framework.”

From an applied perspective, “the identified organizing principle can help marketers predict when and where the preference for natural is likely to loom large.”

Marketers and managers often must make decisions about when to invest in a natural brand or product line.

“Our research suggests that, all else equal, natural products are most popular when they are used for preventative purposes.”


Teaching during times of disruption requires creativity, innovation and flexibility to ensure students get the support they need to achieve core course learning objectives. To help make this possible, Olin’s Center for Digital Education provides support to faculty to ensure successful hybrid teaching techniques.

“Successful online teaching focuses on fostering connections between faculty and students, peer-to-peer learning and crafting engaging lessons that compel students to see the relevance and significance of what they are learning, just as we do on campus,” said Instructional Designer Kella Thornton. “But really effective online instructors not only know how to convey the ‘So, what?’ of their subject, they also know how to make their students feel seen and heard.”

CDE Associate Director Nina Kim explains that “enhancing student learning experiences is a core part of the CDE mission. Through working with faculty one-on-one and group training workshops, we’ve expanded both the instructional and technical toolsets faculty can use to construct their courses.”

From an instructional standpoint, many faculty are expanding their activities to include more interaction and engagement with students. They are also diversifying content types by creating a rich variety of course materials.

“On the technical side, faculty are strategically adopting additional technologies that will allow them to better connect and communicate with students,” Kim said.

But before you click record

In order to produce the best quality of content from home, the CDE’s media team—Media Production Manager Shawn Bell, Video Production Specialist Charlie Drexler and Multimedia Developer Wes Murrell—have a few suggestions.

They define the ideal home tech setup as one that works best for the instructor’s teaching style, enabling them to cater to their instructional needs.

“Remember, you can present information in more than one type of media; utilizing different tools can increase student engagement,” Bell said.

The CDE has developed numerous resources for teaching with tools that you already have—like Zoom. The guides are available on the CDE’s remote media production page and will support faculty understanding of various topics in media production (e.g., camera angles, framing, recording processes, USB microphones).

“When planning your ideal setup, look for a location with natural light, soft furnishings (to minimize echo) and isolation from noise like air conditioners,” Bell said. “Once you find your ideal setup, be consistent.”

For more media pointers, watch these videos on best practices for lighting and camera placement and recording sound. To find online teaching resources, view the Center for Digital Education’s recorded training workshops, subscribe to the CDE’s YouTube channel and watch for the Center’s monthly newsletter.

Pictured above: Olin’s Andrew Knight, professor of organizational behavior, demonstrating a successful at-home tech setup.