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Keeping Watch

Gerard Hoberg's time in the financial industry informs his research, which is identifying ways to help call the next downturn before it happens 

February 12, 2019
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After Gerard Hoberg, professor of finance and business economics, graduated from college, he went straight to the industry, working on a NASDAQ project that had him looking for evidence of dealer collusion. After that, he became the vice president and director at a transaction optimization firm where he focused on algorithms to optimize the municipal bond market. His industry experience made him want to find new ways to solve long-standing, critical corporate finance problems, especially fraud.

With a background in economics and applied physics and a Ph.D. in financial economics from Yale as well as practical experience, he started his academic career at the University of Maryland Smith School in 2004. He kept his connection with the industry and served as a visiting financial economist at the Securities and Exchange Commission from 2012 to 2013 examining securities rules, systemic risk, disclosure, and fraud. Hoberg joined USC Marshall in 2014. 

By looking at markets with fresh lenses and evaluating product market synergies and competition in mergers and acquisitions in new ways, Hoberg’s research continues to have a significant impact. In today’s fast-paced world when trade relationships are changing ever rapidly, his research allows others to develop their own predictions and make important changes to how the industry works.

Hoberg is an applied financial economist whose primary research areas are in corporate finance and industrial organization. His pioneering multidisciplinary industrial organization research lies at the intersection of economics, finance, decision science, management, and computer science. He uses web-crawling algorithms to gather data at the firm, industry, and economy levels and then applies text-based analysis to organize and make sense of the data. 

Seeing the Risks

His Hanley-Hoberg Emerging Risks Data Repository is based on a major computational linguistics project funded by the NSF. Hoberg and one of his co-authors have developed a dynamic, interpretable methodology that can detect emerging risks in the financial sector. Who wouldn’t want to predict the next financial crisis? Their model can predict heightened real estate, prepayment, and commercial paper risk exposures as early as a couple of years ahead of a financial crisis. Overall, their model predicts the build-up of emerging risk in the financial system and bank-specific exposures in a timely fashion.

Hoberg maintains other repositories of data he shares among the government and private sectors both nationally and internationally as well as with other researchers, increasing his research’s impact on both business practice and academic research around the world. The Hoberg-Phillips Data Library creates an alternative to standard fixed industry classifications such as SIC, NAICS, and FIC. Using text-based network industry classifications (TNIC), Hoberg and his co-author have created a way of identifying firms’ competitors through a special representation of their product market grid. In addition, they have information about product market fluidity, which assesses the degree of competitive threat and product market change surrounding a firm.

Hoberg’s research relevance and impact is broad. He also created an offshoring database that is best described as a dynamic firm-nation-year network summarizing the international activities of publicly traded U.S. firms that file 10-Ks.

In 2018, Hoberg received the USC Marshall School Dean’s Award for Research Excellence, as well as the Oliver Williamson Award for best paper at the International Society for New Institutional Economics (ISNIE) Conference. He has received three National Science Foundation Grants, totaling nearly one million dollars. Two of the NSF grants have allowed him to continue his text-based research.

Hoberg’s academic reach is multidisciplinary and international. He teaches popular elective courses about financial restructuring, mergers and acquisitions, and valuation at both the undergraduate and graduate level. In addition, he has demonstrated good mentorship by placing his Ph.D. students at top universities.

Having spent his academic career wrestling with what he witnessed while working in the financial industry, Hoberg hopes to spur change. “I saw a lot of problems in the way the industry really works,” he said. “I wanted to make the industry better.” His goal is to create a more dynamic view of what happens in the market in real time so that regulators can understand what firms are really doing rather than relying on outdated disclosure rules. By looking at markets with fresh lenses and evaluating product market synergies and competition in mergers and acquisitions in new ways, Hoberg’s research continues to have a significant impact. In today’s fast-paced world when trade relationships are changing ever rapidly, his research allows others to develop their own predictions and make important changes to how the industry works.