Background Information

Research and Teaching

• HBS Exec Ed
• HBS MBA-JD Course
• D2D Fund
• Savings
• Savings Bonds
• Prize-Linked Savings
• Tax Refunds
• Household Risk and Financial Fragility
• Financial Attitudes and Skills of Consumers
• Payments
• Credit
• Selected CF Research Organizations

Mutual Funds

Financial Engineering, Financial Innovation and Risk Management

Other

Harvard Information

Charities to Consider

CONSUMER FINANCE

Consumer finance is an important field that studies the markets, institutions, products and services that deliver financial services to households.  Tufano's work involves a combination of empirical research, field-based research, and course development. Working with a nonprofit he cofounded, he also is engaged in the development and testing of financial products and services to better serve low and moderate income consumers. 

Consumer Financial Services - HBS Executive Education:   HBS will be offering an executive education program entitled "Consumer Financial Services: New Models for Success" again in 2010.  For more information about the program, click here.

Consumer Finance - Harvard MBA/JD Elective:  In January 2009, Howell Jackson of Harvard Law School (HLS) and Tufano launched a new course on Consumer Finance.  This course is jointly listed at HBS and HLS.  For a course description, click here. The course also is discussed in the September 2009 Alumni Bulletin as well as in a November 2009 Forbes article entitled "Harvard Business School's New Curriculum: Everyday Finance."

NBER Household Finance Working Group:  In 2009, Nick Souleles (Wharton) and Tufano launched a new working group at the NBER to study issues of household finance.  There will be additional meetings and other activities in 2010. 

Boston Area Consumer Finance Workshop:  Researchers from the Boston Federal Reserve Bank and Harvard University have created a periodic seminar series in the Boston area for researchers interested in consumer finance.  The Spring 2010 meeting currently is scheduled for May 6, 2010 at the Boston Fed.  If you are interested in attending, click here.

Doorways to Dreams Fund (D2D Fund): D2D Fund is a nonprofit whose mission is to use financial innovation to help low-income families build assets and successfully engage the financial service sector in these projects.  Tufano co-founded D2D Fund and serves as its Chairman.  The Tower Group issued a report entitled "D2D Fund: Bringing Dreams to Reality in the Low-Income Marketplace," on D2D Fund's work in May 2006.   There is an article on D2D by Robert Shiller from Yale in one of his syndicated columns. Some of the links below are to research done by Tufano's colleagues at D2D.

Research and Course Development

General Savings and Consumer Finance

• "Consumer Finance," forthcoming in the inaugural volume of the Annual Review of Financial Economics 1 (December 2009), 227-247. This article is a review of the academic literature in the field of consumer finance.
• "Postwar History of US Consumer Finance," with Andrea Ryan and Gunnar Trumbull--coming soon!
• "Using Financial Innovation to Support Savers: From Coercion to Excitement," with Daniel Schneider, in Insufficient Funds: Savings, Assets, Credit and Banking Among Low-Income Households ed. Rebecca Blank and Michael Barr (Russell Sage, 2008).   Also published condensed summaries in Communities & Banking, Federal Reserve Bank of Boston (2009); and National Poverty Center, Policy Brief #14,(Gerald R Ford School of Public Policy, University of Michigan 2009).
• "New Savings from Old Innovations: Asset Building for the Less Affluent," with Daniel Schneider. Pre-press version, published in Financing Low-Income Communities, ed. Julia S. Rubin (Russell Sage, 2007).

Savings Bonds  

In our work on savings programs, we have been investigating how the US Savings Bond program could be reinvigorated to support savings by low-income families.  The papers below represent some of these findings.  We were delighted when President Obama announced on Labor Day weekend 2009 that the Administration will permit all refund recipients to elect to receive some of their refunds in the form of savings bonds.

• For President Obama's September 5, 2009 announcement of the change in policy, click here.   For the text of his announcement, click here.
• Washington Post Op-Ed piece (Oct. 20, 2008) on savings bonds.
• "Just Keep My Money: Supporting Tax-Time Savings with US Savings Bonds" (Oct. 2008).  The findings of a 2007 experiment at H&R Block sites to test the impact of savings bonds on savings activity.
• "Just Keep My Money, Part I."  Rev. April 2007.  The findings of a pre-pilot program to offer U.S. Savings Bonds to tax recipients to stimulate savings. 
• D2D Fund, in conjunction with members of the Savings Bond Working Group, tested the appeal of savings bond at tax time and has documented their work with VITA sites.  For details, click here.

• "Reinventing Savings Bonds," with Daniel Schneider (HBS).  Published in Tax Notes, October 31, 2005, 1-20. An extended version entitled "Reinventing Savings Bonds: Policy Changes to Increase Public Savings" was published as a New America Issue Brief (April 2006).

Prize-Linked Savings 

Prize-linked savings programs give depositors the opportunity to win prizes in lieu of earning interest. These programs have been used since 1694 and are used around the world, but are virtually unknown in the US. 

• "Saving Whilst Gambling: An Empirical Analysis of U.K. Premium Bonds," American Economic Review Papers and Proceedings 98,2  (May 2008.)321-326.  (pre-press version).  
• "Consumer Demand for Prize-linked Savings: A Preliminary Analysis,"  with Nick Maynard and Jan-Emmanuel De Neve.  This paper details the results of market research done in conjunction with Centra Credit Union in Indiana to explore the likely American demand for prize linked savings.
• "First National Bank's Golden Opportunity," with Shawn Cole, Daryl Collins and Daniel Schneider.  This HBS case study details the decision facing FNB bank as it was deciding whether to launch a prize-linked savings program in South Africa.
• D2D Fund, in conjunction with a coalition of partners, has helped to launch Save-to-Win, a prize-linked savings program offered by eight credit unions in Michigan in 2009.  For a preliminary report on the program to date, click here. 

Splitting Tax Refunds

For low-income American families, tax refunds (often made possible by the Earned Income Tax Credit) can be an important source of saving.  The work Tufano and his partners have done has demonstrated that the savings potential of refunds can be enhanced with changes in IRS practices.  We are pleased that this work informed the policy debate and the IRS's subsequent adoption of Form 8888, which allows for the splitting of refunds to multiple destinations.

• "Leveraging Tax Refunds to Encourage Savings," with Sondra Beverly (University of Kansas) and Daniel Schneider (HBS).  Retirement Security Project policy brief 2005-8 (August 2005).
• This brief is part of the larger Retirement Security Project, sponsored jointly by the Pew Charitable Trusts in partnership with Georgetown's Public Policy Institute and the Brookings Institution.
• "Splitting Tax Refunds and Building Savings: An Empirical Test," with Sondra Beverly (University of Kansas) and Daniel Schneider (HBS). NBER Tax Policy and the Economy 20 (2006), 111-161.
• Executive Summary
• This research is cited in a January 31, 2005 letter from Members of Congress to the IRS, requesting that the IRS move forward on a split refunds proposal.
• Commissioner Everson's reply to Members of Congress.
• On May 31, 2006, the IRS announced that it will roll out split refunds in January 2007.
• IRS form 8888, introduced January 2007, implements the split refund concept for all Americans.
• "San Francisco Working Families Credit."  This report, written with Daniel Schneider, details the first year of the City of San Francisco's Working Families Credit, which provides low-income families with augmented EITC funds.  The report offers an empirical analysis of the characteristics of program participants.

Household Risk and Financial Fragility

• Working with Annamaria Lusardi, Daniel Schneider and the market research firm TNS, we have conducted a multi-country study in the summer/fall of 2009 measuring the extent to which households perceive themselves to be exposed to small financial shocks, their ability to cope with these shocks, and the coping mechanisms used.  New research will be forthcoming in 2010.
• TNS Press Release on Financial Fragility

Financial Attitudes and Skills of Consumers

• "Debt Literacy, Financial Experiences, and Indebtedness" with Annamaria Lusardi.  A new study, done in conjunction with the market research firm TNS, that looks at the relationship between peoples' understanding of debt, how they transact, and their self-assessed ability to handle their current levels of debt.  (Rev. May 2008)
• "Teach Workers about the Perils of Debt." with Annamaria Lusardi, Harvard Business Review 87, no. 11 (November 2009). This short article discusses the state of household debt literacy and actions that can be taken to enhance consumers' financial skills.
• D2D ZMET Report on Savings.  ZMET (the Zalman Metaphor Elicitation Technique) is an innovative market research technique designed to uncover consumers' thoughts and feelings using visual images.  This report, prepared in conjunction with the Filene Research Institute, examines how low to moderate income families think and feel about savings.
• D2D has been working to advance the concept of "Financial Entertainment," which embeds financial skill development into commercial-quality media.  The first experiment is Celebrity Calamity, a videogame in which the player takes on the role of the financial manager for a financially-challenged celebrity.  For information on this project and preliminary results on its efficacy, click here.

Payments

• "Bouncing out of the Banking System: An Empirical Analysis of Involuntary Bank Account Closures," with Dennis Campbell and Asis Martinez-Jerez (Rev. May 2008).
• "Central Bank: The ChexSystem Qualifile® Decision," 2007 (208-029) with Dennis Campbell, Asis Martinez-Jerez and Emily McClintock Ekins.
• "Blue Ocean or Stormy Waters? Buying Nix Check Cashing" 2009 (210-012), with Andrea Ryan.  

Credit

• "Where does it go? Spending by the Financially Constrained" with Shawn A. Cole and John Thompson.in Borrowing to live: Consumer and Mortgage Credit Revised, ed, Nicolas P. Retsinas, Eric S. Belsky (Brookings, 2008) 65-91.
• "H& R Block 2006," 2007 (307-091), with Arijit Roy and Emily McClintock Ekins.
• "EDuction," 2005 (206-006), with Daniel Schneider.
• "Circle Lending," 2006 (206-137), with Nabil El Hage and Daniel Schneider.
• "H&R Block's Refund Anticipation Loan: A Paradox of Profitability?" with David Rose and Daniel Schneider (HBS), Rev. Nov 2005.   A condensed version entitled "H&R Block’s Refund Anticipation Loans: Perilous Profits at the Bottom of the Pyramid?" appears in Business Solutions for Reaching the Poor, ed. Kash Rangen and John Quelch (Josey Bass 2007).    

Selected Consumer Finance Research Organizations

• The Corporation for Economic Development (CFED) is a national group dedicated to Asset Building.
• New America's Asset Building Initiative has a comprehensive listing of asset building policies, resources and programs.
• The Center for Social Development, Washington University, School of Social Work is a research center that pioneered the development of Individual Development Accounts.
• The Aspen Institute Initiative on Financial Security.
• The Center for Financial Services Innovation (Shorebank Advisory Services).
• The Federal Deposit Insurance Corporation has established a Center for Financial Research, which supports research in a variety of areas.  Tufano serves as a program coordinator for consumer finance related research and is on the FDIC's Advisory Committee on Economic Inclusion, chairing its savings subcommittee.
• Harvard's Joint Center on Housing Studies.

 

MUTUAL FUNDS

An important stream of work in the consumer finance field has been directed at understanding one of the most popular tools for household savings and investing: mutual funds.

• "Mutual Fund Fees Around the World," with Ajay Khorana (Georgia Tech) and Henri Servaes (London Business School). Rev. May 2007.  This paper looks at the fees charged in a number of developing countries in 2002.  This work has received substantial attention in Canada, which we find to have the highest fees, even after controlling for various fund and family characteristics.  The Canadian fund trade association, the Investment Funds Institute of Canada (IFIC), has objected to our findings.   The authors' response to their critique can be found here.  Some commentators in Canada have raised other questions about the report, and the authors' responses (May 2008) are available here.  Published in Review of Financial Studies 22 (March 2009).
• "Live Prices and Stale Quantities: T+1 Accounting and Mutual Fund Mispricing," with Michael Quinn (Analysis Group) and Ryan Taliaferro (HBS).  Rev. Nov. 2007.
• "Explaining the Size of the Mutual Fund Industry Around the World," with Ajay Khorana (Georgia Tech) and Henri Servaes (London Business School). Journal of Financial Economics 78,1 (Oct 2005).  This is the pre-press version from SSRN.
• "The Costs and Benefits of Brokers in the Mutual Fund Industry," with Dan Bergstresser (HBS) and John Chalmers (U. Oregon), Working Paper.  Updated Jan. 2008.
• "Board Structure, Mergers and Shareholder Wealth: A Study of the Mutual Fund Industry," with Ajay Khorana (Georgia Tech) and Lei Wedge (Georgia Tech). Rev. May 2006.  Journal of Financial Economics 85, 2 (Aug 2007).

FINANCIAL ENGINEERING, FINANCIAL INNOVATION AND RISK MANAGEMENT

Another stream of Tufano's work deals with corporate applications of financial engineering in the form of security design, risk management and real options.  

• Global Survey of Corporate Finance:  In 2005, Tufano and Henri Servaes (London Business School) conducted a survey of CFOs around the world concerning the corporate finance function, including details on the firm's capital structure, liability management, liquidity management, dividend/repurchase, and risk management programs.  This survey was sponsored by DeutscheBank. 

• "The Theory and Practice of Corporate Risk Management" with Henri Servaes and Ane Tamayo, forthcoming in Journal of Applied Corporate Finance (2009).

• “What Drives Corporate Liquidity?  International Evidence from Survey Data on Strategic Cash and Lines of Credit,” with Karl V. Lins and Henri Servaes (Rev. December 2009).
• "Ranking Risk and Finance," with Henri Servaes, Financial Times (June 9, 2006).
• Risk management has broad applicability.  For a new case study on risk management at the UN, see:

  •  "The World Food Programme during the Global Food Crisis (A)." 2009 (709-024) with Anette Mikes, Eric D. Werker, and Jan-Emmanuel De Neve.

  • "The World Food Programme during the Global Food Crisis (B)." 2009 (709-052) with Anette Mikes, Eric D. Werker, and Jan-Emmanuel De Neve
• "Financial Innovation," in The Handbook of the Economics of Finance, ed. George Constantinides, Milton Harris and Rene Stulz (2004).
• "When are real options exercised? An empirical study of mine closings,"   with Alberto Moel.  Published in Review of Financial Studies 15 (2002), 35-64.
• "Cephalon, Inc.: Taking risk management theory seriously," with George Chacko and Geoff Verter. Published in the Journal of Financial Economics 60 (May/June 2001), 449-486.  Abridged version  in the Journal of Applied Corporate Finance. Technical appendix available.
• The Corporate Financial Engineering Course at HBS focuses on how corporations can use financial engineering to advance their goals and strategies.  The course studies the use of financial engineering to structure financing vehicles, implement risk management strategies and carry out strategic transactions.  Tufano developed this course and teaches it in the MBA program at HBS.  Some of these materials are included in the book, Cases in Financial Engineering.
• The Global Association of Risk Professionals (GARP) is a professional organization of more than 50,000 risk professionals worldwide.  Tufano serves as a Trustee of GARP, sits on its Executive Committee, and is the Chair of the Editorial Board of Risk Professional Magazine.
• Correction to "A Real World Way to Manage Real Options" with Tom Copeland, Harvard Business Review, March 2004.  There is a graphic on page 95, which is the binomial tree for the project.  The leftmost node reads "77>321-400."   The number "321" should read "371."  For those of you working through the math, sorry for this typo.

OTHER MBA TEACHING MATERIALS

• Finance2:  Beginning in 2000, HBS launched a new year-long required finance course for all of its MBA students.  This new course was an area-wide effort coordinated by Rick Ruback and Peter Tufano, and it created a large number of new case materials. Many of the case materials designed for the inaugural launch of the course are available in Case Problems in Finance (McGraw Hill, 2004).

HARVARD INFORMATION

• HBS Finance Area
• Harvard Business School
• Harvard University

CHARITIES TO CONSIDER

There are many wonderful nonprofits and charities which deserve your support.  If you are interested in supporting the work of D2D Fund, click here.  In 2007, 2008, and 2009, Tufano rode the Pan-Mass Challenge, a 160+ mile bike ride to raise money for the Jimmy Fund, which supports cancer research.  100% of all donations go to the Jimmy Fund.  If you would like to support the Jimmy Fund through the PMC, click here.