by Scott Fletcher
Richard W. Roll, the Joel Fried Chair in Applied Finance, was named winner of the Graham and Dodd Best Perspectives Award, recognizing timely, thought-provoking opinion, for his article, "The Possible Misdiagnosis of a Crisis." The article appeared in the March/April 2011 issue of the Financial Analysts Journal, a publication of the CFA Institute. The FAJ Advisory Council and Editorial Board selected the winners.
The award, created in 1960, honors the contributions of legendary investors Benjamin Graham and David L. Dodd to the investment analysis field. This is the fourth time Professor Roll has won a Graham and Dodd Award. In addition to his work at UCLA Anderson, Professor Roll is principal of the consulting firm, Compensation Valuation, Inc.
In the article, Professor Roll uses basic principles of finance to challenge prevailing explanations for the 2007-08 financial crisis, "including excessive leverage, subprime mortgages, exotic derivatives, reckless risk taking, and easy money that spawned a housing bubble." He offers an alternative diagnosis for the crisis and prescribes a treatment protocol of less government spending, lower taxes and greater reliance on the private sector to stimulate the U.S. and global economies. Professor Roll describes this as "economic liberalization," meaning an increase in the fraction of GDP spent by the private sector relative to the fraction spent by the public sector.