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From Boom to Bust to Boom

Since its start, Wharton's leadership in the study and education of finance has been uncontested. From the heights of economic prosperity to the depths of the Depression, the School — then known as "the Wharton School of Finance and Commerce" — has helped to shape financial practice and policy. Faculty research has helped bring about reforms of financial systems in the U.S. and around the world, and Wharton professors have developed and refined influential financial tools.

A 1962 study of mutual funds led by Wharton Professor Irwin Friend and prepared for the Securities and Exchange Commission was the most comprehensive report in decades. The study questioned whether mutual funds could perform better than individual stocks — in short, it was a precursor to the rise in index funds — and won wide recognition that led to industry reforms. Wharton professors also authored influential studies questioning the value of professional money managers, while a 1970s study found that eliminating fixed commission rates on stocks would not harm financial markets and thus provided a basis for financial reform. In addition, Wharton faculty were pioneers in capital regulation, creating the concept of risk-based capital standards that now shape financial regulation worldwide.

Wharton has also led in educating financial managers. In 1953, Wharton established the Securities Industry Institute, the first and longest- running executive education program in the US

Wharton's Rodney L. White Center for Financial Research, which opened its doors in 1969, contributed to the widespread acceptance of the capital-asset pricing model in guiding investment strategies. It was also among the first centers to apply computing technology to policy analysis.

Wharton finance professors have shaped the study and practice of economics. Few economists have had the impact of Wharton Professor Simon Kuznets, whose research on the American economy won him the Nobel Memorial Prize in Economics in 1971. Kuznets created reliable statistical data on national output, prices, investment, and capital stock, and also measured seasonability, cycles, and secular trends of these phenomena. His work laid out what became the standard procedure for measuring the Gross National Product, and he later led an international effort to establish the same statistical information for all national economies.

Wharton's first tenured woman professor, Dorothy S. Thomas, worked closely with Professor Kuznets on an influential three-volume study on US population movements from 1870 to 1950.

Considered the world's master econometrician, Professor Lawrence Klein, who won the Nobel Memorial Prize in Economics in 1980, exemplified the new policy scientist. Klein defined the field of econometrics, which combined economic theory with mathematics, thus becoming a powerful way to test theories and predict future economic trends. His work exemplifies the Wharton School at its best: scientific achievement that is simultaneously practical.

Recognizing Wharton's leadership in finance, the Alfred P. Sloan Foundation provided support to establish one of the most far-reaching study projects on the financial services industry. Founded in 1992, the Financial Institutions Center (FIC) conducted groundbreaking work. Their management study received considerable attention from both the Bankers Roundtable and regulators, which led to a move towards enterprise-based risk evaluation. The FIC has also conducted a life insurance study that was the largest of its type in the industry.


IN MEMORIAM

Dr. Jean Andrus Crockett — a distinguished economist, professor emeritus of finance, and a former chair of the Faculty Senate — was a woman of many firsts. She was the first female department chair of the Wharton School, the first woman to lead the Faculty Senate, and the first woman to chair the Federal Reserve Bank of Philadelphia. Dr. Crockett, who died in 1998, was a scholar of consumption and savings, investment, financial interest rates, markets, and the economics of health care. She published widely in major scholarly journals and also held a series of public service positions throughout her career.


"Wharton is the center of the finance industry in many respects. Wharton's vision of the evolution of business, being analytical but also practical and results- oriented, is truly unique among business schools today. At the Financial Institutions Center, we serve as an interface between academic research and the practical needs of industry."
Anthony M. Santomero, Richard King Mellon Professor of Finance and Director of Wharton's Financial Institutions Center


"Wharton faculty helped lead the way in restructuring the industry and understanding opportunities. If Wharton hadn't been there, the changes might have been slower. We did it first, and we enhanced the speed of change, thereby leading to more efficient markets."
Marshall Blume, Howard Butcher III Professor of Financial Management and Director of the Rodney L. White Center for Financial Research


Simon Kuznets, who won the Nobel Memorial Prize in Economics in 1971, lectures to a class of Wharton students that includes (from left to right) Edward Brink, a future Wharton marketing professor; Morris Hamburg, a future Wharton statistics professor; Betram Zumeta, future executive vice-president of First Pennsylvania Bank; Edward Du Bois, future business professor at Fort Lewis College; and Hyman Menduke, future biostatistics professor at Jefferson Medical College.


Lawrence Klein (left), founder of econometrics, won the Nobel Memorial Prize in Economics in 1980. Dorothy Thomas (center) was Wharton's first tenured woman professor and Irwin Friend (right) conducted research on mutual funds in the 1960s that helped shape the industry.


Professor Anthony M. Santomero (at left in photo above), director of the Financial Institutions Center (FIC), at the inaugural Brookings-Wharton Conference in 1997. The FIC and the Brookings Institution hold an annual forum and publish a journal on financial policy issues.


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