But Hsu, a doctoral candidate in the UCLA Anderson School of Management, disagrees. He thinks the experts are misled because they compare stock market fluctuations with aggregate measures of consumption. But only 20% to 30% of Americans own stocks or mutual funds in their own names. It’s these people who bear the actual burden of risk, as Hsu sees it.
Focusing on “the selective fraction of the economy that actually holds stock,” Hsu says, produces empirical evidence that stock market fluctuations produce significant effects on consumer spending. “The people who matter to the stock market, who have the money and the background to invest, are changing their consumption profile as bull and bear markets come and go,” he says.
Another part of Hsu’s study of equity investment looks at how to encourage large pharmaceutical companies to do research in socially useful but not very lucrative areas. Pharmaceutical companies “would be happiest if they could spend all their time looking for a cure to the common cold or creating drugs that help people in the United States,” Hsu says, “but then there’s the rest of the world.” While other countries depend on U.S. research for advances in medical treatment, their people often lack the income to pay for new and expensive drugs.
Grants and extended patent protection are the most common incentives used to persuade pharmaceutical companies to look beyond U.S. borders. Hsu’s analysis suggests that “a type of co-payment plan”—in which a government or foundation would pay the difference between what customers can afford and what companies need to turn a profit—“has superior properties for inducing research activity.”
Hsu’s interest in finance began during his undergraduate years at the California Institute of Technology, where he earned degrees in both economics and physics. After studying finance at Stanford Graduate School of Business, Hsu spent a couple of years in his native Taiwan. There he did business consulting and was a research fellow and visiting lecturer at Taiwan National Chengchi University.
Returning to the U.S., Hsu decided to pursue a doctoral degree rather than a master’s because he wants to teach. He came to UCLA because he admired the work of two faculty members, Eduardo Schwartz and Dick Roll, who became his advisers. Schwartz first got to know Hsu as a teaching assistant in a basic corporate finance class. “He was incredibly good,” Schwartz says. “The students loved him.”
And Hsu loves teaching. Being a lecturer at the Taiwan National Chengchi University “was a blast,” he says. “That’s when I knew that I would really enjoy teaching and that I was pretty good at it.” His success as a teacher, he says, comes from “knowing what people might be confused about or might not understand. I go through the same process with the material, so I can empathize.”
His empathy also arises from his experience at age 11, leaving Taiwan, where he was always first in his class, and coming to the United States, “where I had no idea what was going on,” he says. Although learning English was an enormous challenge, history was “my most dreaded subject,” he says. “Most people knew who George Washington was. For me that was a brand new thing.”
By the time he entered junior high school, Hsu was up to speed, and he credits the teachers in his public schools, who “were so unbelievably supportive,” taking time with him instead of just sending him off to ESL classes.
Hsu is also a big fan of the professors in the Anderson School. Their support and counsel during his years at UCLA “are more than I could ever ask for.”