Bridging Theoretical & Practical Finance: The Transfer of Knowledge w/ Dr. Matthew Faulkner

Dr. Matthew Faulkner, CFA - Finance Professor at San José State University and Trustee for the City of San José Pension Fund - discusses bridging the gap between financial theory and real-world practice on our latest episode of the CFA Society San Francisco podcast. 

Join our show's host, Tanya Suba-Tang - Membership Director at CFA Society San Francisco - as she delves into Dr. Faulkner's compelling journey from academia to practical application. Dr. Faulkner's perspective and experiences highlight the importance of collaboration between academics and practitioners, emphasizing the unique contributions each group can make to the field of finance and paving the way for future financial innovations.

Whether you're an academic, a practitioner, or someone considering a career in finance, this episode is packed with valuable insights on leveraging both theoretical and practical knowledge to make more informed financial decisions.


Meet Dr. Matthew Faulkner

Dr. Matthew Faulkner, CFA is a Finance Professor at San José State University where he teaches undergraduate and graduate students in corporate finance and business valuation. His research interests intersect corporate finance and behavioral finance to understand why and how companies and management make decisions while his private consulting work is in valuation. 

In addition to his academics, he is a Trustee for the City of San José pension fund, serves as a FINRA arbitrator, and a volunteer with CFA Institute. Dr. Faulkner holds a bachelor’s degree in finance from UNC-Wilmington, an MBA in international finance and investments from the University of Valencia, Spain, and UNCW, and a doctoral degree from Florida Atlantic University.

If you'd like to learn more about the show, have a topic or speaker to suggest, or would like to leave us a comment, email podcast@cfa-sf.org.


This podcast is produced by CFA Society San Francisco, a not-for-profit professional association, providing professional learning and career resources to over 13,000 investment industry professionals worldwide. To learn more about CFA Society San Francisco, visit our website or connect with us on LinkedIn.

The information contained in this podcast does not constitute financial or investment advice. Please consult your own financial advisor for information concerning your specific situation.

Transcript

Lindsey Helman: 0:06

Hello and welcome to the CFA Society San Francisco podcast, where we interview and discuss trends with leaders from across the investment and finance industry. This month, our host Tanya Suba-Tang, membership Director with CFA Society San Francisco, had the pleasure of speaking with Dr. Matthew Faulkner, finance professor at San Jose State University. Listen in as they discuss the roles of academics and practitioners and the transfer of knowledge.

Tanya Suba-Tang: 0:34

Hey, Matthew, great seeing you today. How are you?

Dr. Matthew Faulkner, CFA: 0:37

Good Tanya. Thank you for having me here. It's great to see you.

Tanya Suba-Tang: 0:40

Well, thank you for joining me today. So, M matthew, I'm really excited to get into our conversation, because today we're going to talk about academics and practitioners and obviously, as a San Jose State University assistant professor of finance, you have a little bit of knowledge behind this. So we're going to talk about knowledge transfers between the academics and practitioners and, like I said, you are an academic and occasionally a practitioner. So set the stage for our discussion, for our listeners, if you please.

Dr. Matthew Faulkner, CFA: 1:10

Of course. So again, my name is Matthew. I am a trustee for the City of San Jose's Pension Fund, as one of my practitioner works, and volunteer for CFA Institute, and then my major role is the professor of finance at San Jose State, and I'd like to take you on a bit of a journey here regarding the financial markets and how we work together. And I'd say imagine a vast, tumultuous ocean. Standing next to the ocean, we have the academics. They're the so-called cartographers who map the currents and the winds. They theorize the best routes and methods to navigate the waters safely and efficiently. They work tirelessly, they have their data, they have models, they have simulations and they're attempting to understand every let's call it wave, tide, whirlpool.

Dr. Matthew Faulkner, CFA: 1:56

And on the ocean we have the practitioners. We'll call them the seasoned sailors and the captains who are out on the open sea every day. They feel the wind in their hair, the deck beneath their feet, they make split-second decisions based on the reality around them. Sometimes they follow the maps, other times they have to alter the maps, and sometimes they have to throw the map away and rely on gut instinct honed by their experiences. So, as a finance professor, practitioner combination, I kind of stand on the shore between these two worlds. Today I'm speaking more focused from the academic side, but I'm constantly marveling at how both are so essential yet they often find themselves speaking different languages, sometimes questioning the other's map or the reality of the sea. So I guess today, setting the stage, I want to take you on a bit of a voyage, exploring these two worlds, taking the perspective of an academic, trying to understand the challenges faced between working together and leveraging the unique strengths to make better, more informed decisions, to understand financial markets.

Tanya Suba-Tang: 3:00

Well, thank you for that. So, as mentioned earlier, you are assistant professor of finance. You have your CFA and your PhD as well, so you know that's an interesting combination. So tell us more about the process of becoming an academic route and getting your PhD.

Dr. Matthew Faulkner, CFA: 3:26

Certainly, I think in this discussion, i It's useful to understand what it's like to get a PhD, for us to, as academics and practitioners, to understand each other better. But it typically starts the way you'd imagine any upper level schooling would. You take master's level classes and you start working in the kind of your basic setting, but that doesn't last long. That's only one or two semesters. The rest of your time is spent trying to become a researcher. You understand research methods, how to work with data, how to find statistical significance, and then you spend all the rest of your time reading financial theory papers, reading the academic research and then trying to develop your own and honing in that skill set. So if I had to give two umbrellas that come out of the PhD program that I wasn't aware of when I started, was you learn to just question everything. So, regardless of what gets thrown at you, you question what's the reason behind it, what was the theory developed, how did they test it? And then, when you are doing your own research, you try to find generalizable results, so results that hold generally across the entire set of companies y ou may be examining - S&P 500, all publicly traded companies or international - as opposed to trying to understand one specific situation.

Tanya Suba-Tang: 4:34

Wow, so, you know, many of us have no idea what it's like getting a PhD, so that's a very thorough and thank you for sharing your experience. So now that you've the journey to better understand and kind of settings of academics and practitioners, can you kind of explain what are some of the challenges and benefits of practitioners working with academics and maybe vice versa?

Dr. Matthew Faulkner, CFA: 4:57

Yeah, certainly I'll start with the challenges, and some of this goes into the idea of what the training was. But it's not uncommon to hear that academics sometimes are seen as too theoretical and maybe disconnected from practice. So that's always going to be a bit of a challenge. But hopefully understanding what our goal in research is will help practitioners and academics understand each other. I'd say the second challenge would be I don't want to. I'll speak a little bit personally, but we tend to be inconclusive. The idea of questioning everything doesn't really lead you to solid foundation conviction that you would have on any specific question. And lastly, I'd say the challenge could be we're slow. It takes a long time to develop theories, to execute analysis and then the publishing research process it could be years, versus having to make a decision today. So those would be the three challenges. I'd toss out. The benefits. I'll point out that we're thinkers, we like to deep dive and we do question everything. This could be awesome to have an alternative perspective from somebody sitting at the table helping to make a decision. I'll also point to some of our commonly used things like the CAPM (Capital Asset Pricing Model), F fama and French factors. If we point to the behavioral finance loss aversion and prospect theory. We have to thank some academics for those topics that we all typically employ.

Tanya Suba-Tang: 6:20

So these are some really interesting thoughts. So thank you for sharing those great points to consider. So now you know for listeners, share some actionable items and takeaways or concluding thoughts. You know whether you're a seasoned practitioner, academic, or even maybe a listener trying to decide which direction they'd like to go to. What can you give us?

Dr. Matthew Faulkner, CFA: 6:38

Yeah, certainly. I think that's a great question. That's a fantastic way to wrap up is to share some actionable insights, and I'll call them food for thought as well. How can we work together? So I'll point to this as academics, we train students. So if you're a practitioner, share your ideas and your experiences with professors, whether in your local area or via a Zoom meeting that they can employ in their courses. Right, make them aware of what's going on in practice. To combine these theories with the real world experiences you've lived, I would say consider academics on board of directors, boards of trustees. That alternative perspective, the deep dives, the questioning everything can prove useful in the group setting to help find the best answers and solutions. I'll point to a lot of practitioners and their companies. Maybe a little broader, go to job fairs and I will say a fantastic I don't want to say cheap, but cheap recruitment tool of human capital is if you network with the professors, you can discuss with them when you have job openings of any students you think would be fitting for these jobs. That is a way, more cost effective way to get human capital than to have to arbitrarily set up a table at a university.

Dr. Matthew Faulkner, CFA: 7:52

I think guest lecturing is awesome. My students love it when a guest lecturer stops in and comes in for the 40 minutes and tells their journey. Our field, the finance field, financial markets, broader economics, accounting it's vast and at many times opaque, especially in the classroom setting for students. So share your journey. Ask the professor if you can stop by and share your experiences. It's fantastic. I love having it. The students love having it. So, to wrap up, maybe actionable takeaways for practitioners working with academics consider inviting them to your picnic table. Bring them along, share the table with them, ask for some of their thoughts and insights. Obviously, if others have more thoughts, suggestions or questions, I'm more than happy to talk about this and I'm sure there's ways they can contact the CFA Society to find out more.

Tanya Suba-Tang: 8:39

Well, thank you, Matthew. Thank you for Food for Thought. It was really great speaking with you.

Dr. Matthew Faulkner, CFA: 8:43

Tanya. Thank you for having me.

Lindsey Helman: 8:52

Thank you for listening to the season four finale of the CFA Society San Francisco podcast. We hope you enjoyed the engaging discussion. Join us this upcoming August for the season five premiere. This podcast is produced by CFA Society San Francisco, a not-for-profit professional association providing professional learning and career resources to over 13,000 investment industry professionals worldwide. To learn more about CFA Society San Francisco, visit our website at cfa-sf. org or connect with us on LinkedIn.