Featured research articles and books on management and technology
Faculty Director of the Fisher CIO Leadership Program
Terrence Hendershott is Faculty Director of the Fisher Center for Management and Technology and the Fisher CIO Leadership Program. He currently holds the Cheryl and Christian Valentine Chair as a professor at the Haas School of Business at the University of California at Berkeley. He completed his Ph.D. at the Graduate School of Business at Stanford University. Terry’s current research interests include information technology’s impact and role in financial markets, the structure and regulation of financial markets, and the interaction between trading and asset price dynamics. His writing has appeared in the Financial Times and The Wall Street Journal and his research has been written about in The New York Times, The Wall Street Journal, and other national newspapers and magazines. His academic work has been published in the most prestigious finance and economic journals. He edited Elsevier’s Handbook of Economics and Information System. He has received a National Science Foundation CAREER award for his research on electronic trading in financial markets. He was the visiting economist at the New York Stock Exchange in 2006 to 2007. He was a member of the Nasdaq Economic Advisory Board from 2004 to 2007 and Chair in 2007. He has consulted for various financial markets and investment firms.
Current Research and Interests
- Management of information systems
- Role of information technology in financial markets
- Electronic communications networks (ECNs) and stock market design
- Regulation of financial markets
- How electronic markets compete with traditional businesses
Selected Papers and Publications
- “Does Algorithmic Trading Improve Liquidity?” with Charles Jones and Albert Menkveld. Journal of Finance (forthcoming).
- “Automation Versus Intermediation: Evidence from Treasuries Going Off the Run,” with Michael Barclay and Kenneth Kotz. Journal of Finance 61 (October 2006): 2395-2414.
- “Competition Among Trading Venues: Information and Trading on Electronic Communications Networks,” with Michael Barclay and Tim McCormick. Journal of Finance 58 (December 2003): 2637-2666.
- “Crossing Networks and Dealer Markets: Competition and Performance,” with Haim Mendelson. Journal of Finance 55 (October 2000): 2071-2115.
- Analytic Decision Modeling Using Spreadsheets
- Information Technology Strategy
- Operations Management
Honors and Awards
- New York Stock Exchange Euronext Award for the best paper on equity trading, Western Finance Association Meetings (2001, 2008)
- Nasdaq Award for best paper on market microstructure, Financial Management Association (2007)
- Schwabacher Fellowship Award, 2005-2006
- National Science Foundation Grant #0133848, CAREER: Electronic Trading Systems
Featured research articles on management and technology
“The CIO – Role, Talent, Pace”, Book publication pending
Jim Spitze’s upcoming book distills and summarizes the success factors found in the extraordinarily successful careers of the CIOs of FedEx, Marriott, P&G, Levi Strauss, Charles Schwab, Frito-Lay, American Airlines, and two dozen other industry-leading firms. The author focuses on the specific leadership skills required to acheive innovation-based competitive advantage.
“The Renaissance CIO Project – The Invisible Factors of Extraordinary Success” in California Management Review, 54, Winter 2012
Jim Spitze and Judith Lee examine the careers of fourteen highly successful Chief Information Officers, CIOs, selected by a committee of globally respected peers. Their quest is to identify the most important role-specific career success factors in this group of CIOs. They consider success influences such as placement in the organization’s reporting structure, particular combinations of technical and managerial skills, and factors that may be characterized as unique.
“Competing for Attention in Social Communication Markets”, Management Science, 11 May 2015.
Ganesh Iyer and Zolt Katona examine agents’ incentives to communicate with their peers in the context of new social media technologies. New social networking technologies make it possible to send the same message to many receivers for the same fixed cost and for negligible (often zero) marginal cost. This is different from traditional word-of-mouth communication that imposes a positive marginal cost for each intended recipient. Iyer and Katona show that as the marginal cost of sending messages to additional people goes down, senders target more receivers leading to higher levels of competition for attention between receivers. The intensified competition requires higher effort on the senders’ part leading to lower payoffs and, eventually, fewer senders in the population. Although receivers are targeted by more senders and they have access to a higher variety of messages, the variety of messages sent by the population decreases.
“New Frontiers in Open Innovation” (Oxford Press, 2014) is a collection of analytical papers edited by Haas professor Chesbrough, who is also director of the Garwood Center for Corporate Innovation at Berkeley-Haas, Wim Vanhaverbeke of the University of Hasselt, Joel West of the Keck Graduate Institute, elaborating on Chesbrough’s well-known open innovation concepts. Chesbrough and his co-authors extend their analysis of open innovation to include socially focused non-profits, high-tech “platform” companies, and the difficulties businesses have in capitalizing on the fruits of internal research and development that fall outside their core competencies.
“High Frequency Trading and Price Discovery“, in Review of Financial Studies, 27, August 2014
Terry Hendershott’s work contributes to understanding how a new financial market intermediary, high frequency trading (HFT), affects market structure and performance. In an empirical investigation using transaction level data from NASDAQ, Hendershott and his coauthors find that HFT increases the efficiency of prices by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors. This greater trade price efficiency, however, is balanced against the adverse selection costs that HFTs impose to other traders.
“Harnessing Naturally-Occurring Data to Measure the Response of Spending to Income”, Science, 345, 11 July 2014
In this paper Steve Tadelis and co-authors present a new data infrastructure for measuring economic activity. The infrastructure records transactions and account balances, yielding measurements with scope and accuracy that have little precedent in economics. The data are drawn from a diverse population of 75,000 people and 60 million transactions. Tadelis and coauthors evaluate the economic theory that predicts that when someone receives income should have little effect on their spending patterns. As in previous studies and in contrast to the predictions of the theory, there is a response of spending to the arrival of anticipated income. However, closer inspection reveals that this is driven by the convenience of linking regular payments, such as rent and utilities, to regular income. Unsurprisingly, cash-strapped people are more likely to increase their spending in response to receiving income.
“Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment” (with Tom Blake and Chris Nosko). Working Paper, February 2013
Tadelis and coauthors study the effectiveness of online advertising. In recent years, internet advertising has been the fastest growing advertising channel with paid advertisements on search platforms (e.g., Google and Bing) comprising the bulk of this revenue. Tadelis and co-authors present results from a series of large-scale field experiments done at eBay that are designed to detect the causal effectiveness of paid search advertisements. Results show that brand-keyword ads have no short-term benefits, and that returns from all other keywords are a fraction of conventional estimates. They find that new and infrequent users are positively influenced by ads but that existing loyal users whose purchasing behavior is not influenced by paid search account for most of the advertising expenses, resulting in average returns that are negative. They discuss implications for advertising decisions in large firms.
“Too Much Information? Information Gathering and Search Costs” (co-authored with Fernando Branco and Monic Sun), Working Paper, 2014
This paper provides a rationale for why too much consumer information may hurt consumer decision-making. Miguel Villas Boas and co-authors derive a theoretical model of costly consumer information search in the presence of limited information. They derive the consumer ‘s optimal stopping rule in the search process. The optimal amount of information increases with the consumer’s ex-ante valuation of the product. They also show that there is an intermediate amount of information that maximizes the consumer ‘s expected utility from the search problem and that this amount may be smaller than that which maximizes the probability of purchase. That is, the market outcome may lead to information overload with respect to the social welfare optimum.