When Wall Street Catches Up to Academia

Hi, I'm Matt. Welcome back to AI Street, your weekly brief on AI + finance.

ANALYSIS   When Wall Street Catches Up to Academia

Wall Street often dismisses academics, but history has shown that professors sometimes outpace the trading floor.

Take 1965, for instance. Michael Milken, then an undergraduate at UC Berkeley, stumbled upon a book that hardly screamed “get-rich-quick”: Corporate Bond Quality and Investor Experience by W. Braddock Hickman.

The book revealed that markets consistently overestimated the default risk of what would later be called “junk bonds.” Milken, of course, went on to pioneer the high-yield bond market.

Prof. Valeri Nikolaev giving his keynote to a packed room at the ICAIF conference

A more recent study from University of Pennsylvania professor Daniel Taylor hit close to home for me. His research exposed how an SEC rule—meant to shield executives from accusations of insider trading—was being exploited.

I covered SEC enforcement for years and actually knew about the s…