Professor of Finance and Accounting at the Rady School of Management at UC San Diego, Dr. Joseph Engelberg, enjoys pursuing the out-of-the-box behavioral finance topics that become truly useful to the industry. Whether it’s recognizing that sports team rivalry drives up rental prices or that political affiliation influences investments during a global pandemic, Engelberg notices how we think and behave around finance. And then he writes about it in thoughtful, accessible ways. It’s no wonder he’s the Atkinson/Epstein Chair in Management Leadership. And we’re so proud to have him among our Rady School faculty.
If you already know that sports team rivalry can drive up prices of Airbnb rentals in hosting towns, you’ve likely read the behavioral finance research of Professor of Finance and Accounting at the Rady School of Management at UC San Diego, Dr. Joseph Engelberg. If you know that stocks go up after a shock of attention—and that it’s best to avoid buying that stock—an Engelberg insight fueled that discovery. And if you’ve heard that throughout COVID-19, the gap between Republicans and Democrats in terms of their bullishness about stocks significantly widened, again, this discovery comes from Engelberg’s intriguing research.
All of his work, even from the beginning when starting out with his doctorate in finance from the Kellogg School of Management at Northwestern University, has focused on studying the behavior around finance in ways that truly serve the profession. And this comes at a time when, due to the explosion of social media and the correlated misperceptions leading to stock mispricing, understanding how we view and feel about finances has never felt more pressing. “Behavioral finance, I think, is more important now than ever,” Engelberg says.
When asked which of his research papers he loves the most—out of the 19+ he has published, and mostly in top-tier publications, he returns to the one with the most impact: “Internet search volume as a measure of investor attention.”
“This work was most cited not because people think it’s an amazing breakthrough; but because it’s useful. People have been using search as a measure of investor attention,” he says.
In this 2011 research paper, Engelberg and co-authors Pengjie Gao and Zhi Da, both from the University of Notre Dame Mendoza College of Business, propose a new and direct measure of investor attention using search frequency in Google search volume index, or SVI. Through researching a sample of Russell 3000 stocks over four years, the researchers found that SVI is correlated, captures investor attention in more timely ways, and measures the attention of retail investors. Thus, an increase in SVI predicts higher stock prices within two weeks and a price reversal within the year. “We found, through this research, that search behavior of millions of individuals is a nice real-time measure of what people are thinking about.”
When looking for other themes of Engelberg’s work, he agrees there’s a pattern of outside-of- the box concepts. For instance, his research, titled: “Human Capital and the Supply of Religion,” published in the Review of Economics and Statistics, considers the impact that pastors have on attendance growth. Engelberg and his co-authors also explored whether the Methodist Church organization places pastors in ways to maximize attendance.
On whether or not individual pastors affect Sunday attendance, the answer becomes, sort of—depending on the pastor. If you replace a 25th percentile pastor with one at the 75th percentile, it increases attendance growth by 3%. But persistent influence of pastors on growing attendance is casual. “That’s part of what’s great about being an academic—it’s the creativity and freedom of choosing topics you find interesting,” he says.
Meanwhile, editors, investors, and commentators hail his research. Of his peer reviewed works, 12 are in the top three finance journals including the Journal of Finance, the Journal of Finance Economics, and the Review of Financial Studies. He possesses a strong citation record with over 6,000 citations and has won multiple research awards including the Best Empirical Finance Paper and Best Discussant in 2010.
This year’s research, published in Real Estate Economics, found Airbnb hosts in college towns increase their listing prices when home football games against rival teams are underway. This behavior reduces bookings and rental outcome by 78%, the paper finds, because Airbnb hosts’ biases drive sub-optimal pricing. “We found that the strong emotions involved in college football rivalries confounded listing prices set by households,” Engelberg says. Home game weekends drive big revenue during football season—six weekends alone equate to 60% of total rental income between August and December—so this finding feels huge, he notes.
They Call Him “Joey”
The source of this impactful research and his interest in finance began as a boy growing up in Solana Beach, Calif. The young Joseph, or “Joey,” adored it when his dad would teach him about all things accounting and finance, even stock ownership—something his father knew well from being a partner in one of the city’s largest accounting firms. “I remember having shares of the Boston Celtics, when the team was a publicly traded firm, and checking my stock price daily,” he recalls.
Engelberg, an entrepreneur like his pops, launched a tutoring service as a college junior by noticing that, during exam time, student demand exceeded the limited hours of the service where he tutored. He booked a room, charged $25 instead of the $9 the school paid him, and customers lined up. “Twenty students booked me that first day,” he laughs.
Engelberg also learned a lot from his undergraduate studies, a dual mathematics and business major, including the power of friendship, mentorship, hard work, serendipity, and the growth that can result.
He attributes his love for financial research to his professor Larry Harris, a financial economist and expert in market microstructure. When Harris offered to pay his students $1 for each typo the students discovered in his new 650-page textbook, Engelberg took the challenge. That, and earning an unprecedented perfect score on his final exam, got him on Harris’ radar and ultimately landed him an apprenticeship when the Securities Exchange Commission appointed Harris as their chief economist. “It’s sort of a butterfly effect,” he says of this high-growth learning period. “Some things just happen to go right; and this period of time clarified for me that I wanted to secure a doctorate in finance,” he says.
A Well-Loved Professor in His Field
With Engelberg, it’s hard to ignore his open, down-to-earth communication style. Like his fellow endowed-chair peers at the Rady School, his students have honored him with Excellence in Teaching Awards and two Most Valuable Awards. Asked what he loves the best about teaching, he says it’s the opportunity to give back in the ways his mentors, like Harris, gave to him.
As a professor, he facilitates discussions versus lecturing, and breaks down difficult terms and concepts into accessible, interesting language. His writing receives the same love and audience-centered consideration: Bullet points and short, digestible paragraphs have become a signature Engelberg trait. “This way, the ideas remain accessible, applicable, and others can relate,” he says.
Even his classroom approach resembles this accessible, relatable—likeable style. In a live, online class in 2020, Engelberg budgeted time for students to ask about what mattered most: The job market post-graduation.
Engelberg also notices the “superstars” and writes to them of their potential, as his mentor, Harris did for him. The words might be simple, such as: “I think you’re a special student and you ought to consider pursuing your doctoral degree. I’d like to help in that effort.” And yet, the impact is huge. Mentees have become superstars in top-tier doctoral programs, and he feels thrilled.
“It’s so funny,” he says, reflecting on the language he uses. “Because that’s almost word-for-word what Larry said to me 20-years ago. It feels good being that person for others now.”
What’s next for Engelberg
The ongoing and subsequent waves of COVID-19 underway at the time of this interview kept Engelberg fascinated about the intersection politics has in all facets of our lives—not just health and wellbeing, but also in finance. He wants to research this phenomenon more deeply and learn, without bias, what can motivate someone to decide to sell or buy a stock based on their politics. “That political views can influence both investor views, and how worried we are about COVID-19, is so interesting,” he says.
Research in service of his industry stays a top value and priority. While he enjoys consulting for large organizations and the rich knowledge this can bring, Engelberg tries to avoid media interviews. His LinkedIn profile remains non-showy and succinct, by design.
He also wants to continue to nurture the next generation of financiers. And with his involvement in the Rady School’s new undergraduate major in business economics, and a new undergraduate course in business finance, Engelberg looks forward to bringing his vigor and energy to his students.
“I’m going to continue to nurture and lead my students. With my research, I want to continue to lean into that politics and finance space. It’s growing and becoming increasingly important, even with the economic decisions we make,” he says. “I’m right where I want to be.”