In the 20-plus years I’ve been in the public finance business, I’ve always been surprised at how little academic research has been done on our markets. Compared to the corporate bond or equity markets, the municipal bond market has attracted as little attention from scholars as it attracts from most business school graduates.
Maybe some think the industry isn’t as sexy as some other fields of finance. This, even though Sherman McCoy, that “Master of the Universe,” was a municipal bond salesman.
I think quite the contrary. I believe the industry is exciting and becoming even more so. I think our market is deserving of more study and that the conclusions warrant greater consideration amongst practitioners.
With the introduction of many new products over the years — variable-rate demand bonds, auction-rate securities, swaps, index floaters, tender-option bonds, Build America Bonds, and direct placements, to name a few — the industry has new markets ripe for investigation and comparison.
Likewise with market failures like the financial crisis of 2008, the collapse of the bond insurance market and increasing municipal bankruptcies, the industry has had many teachable moments of late.
Further, with the advent of real-time data provided by sources like the Municipal Securities Rulemaking Board’s online EMMA system or numerous private-market data providers, scholars have unprecedented access to information about our markets.
To guide issuers about their best execution, the industry owes it to issuers to undertake further study and put the conclusions resulting from such studies into practice.
Let’s face it: The seat of our pants may not be sufficient anymore to determine the right price for a bond, the proper value of a call option, the best sale methodology, the value of multiple ratings and the optimal type of debt to issue. Only through better research can we practitioners confirm what we may (or may not) know.
Research also allows our clients to become better-informed consumers and leads to better plans of finance and lower overall risk for them.
And so it is that my colleague, Dan Bergstesser, professor at Brandeis University International Business School in Boston, decided to do something about this analytic gap. The inaugural Municipal Finance Conference, hosted by the Rosenberg Institute of Global Finance at Brandeis IBS on Aug. 3, will bring together leading muni market researchers and public finance practitioners from across the country.
In this forum, researchers can defend their research and get insight into how our markets really work. At the same time, practitioners can be assured that the available research is rigorous, thoughtful and valid.
It is our hope that more and better research leads to new best practices and that issuers, taxpayers and bondholders will be the beneficiaries.
Richard Ryffel is a managing director of investment banking at Edward Jones and an adjunct professor of finance at the George Herbert Walker Graduate School of Business and Technology at Webster University in St. Louis. Enroll for the conference at Brandeis free of charge at www.brandeis.edu/global/municonference.