There are two CORE courses in capital markets in the elective curriculum: Investment Management and Investment Strategies.

More broadly, many students have found that a thorough understanding of capital markets and the business of investment management is valuable in a wider set of careers outside of finance and in managing their personal wealth. Thus, students interested in pursuing careers in mutual funds, hedge funds, pension funds, endowments, wealth management, financial consulting, marketing and client service, sales and trading, investment banking, private equity, venture capital, and corporate finance should enroll in the course. This is a CORE course for students pursuing careers in finance. In summary, the low risk anomaly in the stock market produces a potentially significant cost of capital requirements. Assuming competitive lending markets, banks’ low asset betas implied an average risk premium of only 40 basis points above Treasury yields in our sample period a calibration suggests that a ten percentage-point increase in Tier 1 capital to risk-weighted assets may have increased this to between 100 and 130 basis points per year. The size of the low risk anomaly within banks suggests that the cost of capital effects of capital requirements may be considerable. However, over the last 40 years, lower risk banks have higher stock returns on a risk-adjusted or even a raw basis, consistent with a stock market anomaly previously documented in other samples. We confirm that the equity of better-capitalized banks has lower systematic risk (beta) and lower idiosyncratic risk. Standard theory predicts that, in perfect and efficient capital markets, reducing banks’ leverage reduces the risk and cost of equity but leaves the overall weighted average cost of capital unchanged. Setting them balances a number of factors, including any effects on the cost of capital and in turn the rates available to borrowers. Minimum capital requirements are a central tool of banking regulation. Outside of Harvard, he serves as Director of Research at Acadian Asset Management, an institutional asset management firm focusing in active global and international equity strategies, and as a board member at Triton International, the world's largest intermodal container leasing company. Before beginning his doctoral studies, he was a senior associate at Charles River Associates and a member of the US Olympic rowing team. in finance from Cambridge University, and a bachelor's degree in applied mathematics-economics from Brown University. in business economics from Harvard University, an M.Phil. He has been a course head in the MBA required curriculum at Harvard Business School, he has taught in the MBA elective curriculum and several executive education programs, he has developed elective courses in investment strategies and behavioral finance, and he has received the MBA teaching award.īaker received a Ph.D. His research awards include the Brattle Prize, given annually by the American Finance Association to the best corporate finance paper in the Journal of Finance, second place for the Jensen Prize, given annually by the Journal of Financial Economics, the Sharpe Award, given annually by the Journal of Financial and Quantitative Analysis, and the Graham and Dodd Scroll, given annually by the Financial Analysts Journal. He has served as associate editor for the Journal of Finance and the Review of Financial Studies.īaker was Unit Head for finance from 2014 to 2018 and Program Director for corporate finance at the National Bureau of Economic Research from 2011 to 2018.

Professor Baker has made numerous presentations to academic and practitioner audiences.

His research is in the areas of behavioral finance, corporate finance, and capital markets, with a primary focus on the interactions among corporate finance, investor behavior, and inefficiency in capital markets. Kirby Professor of Business Administration at the Harvard Business School, where he currently teaches finance in the required curriculum.

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