Zvi Bodie

Zvi Bodie (born April 27, 1943[2]) is an American economist, author and professor. He was the Norman and Adele Barron Professor of Management at Boston University, teaching finance at Questrom for 43 years before retiring in 2015.[3] His textbook, Investments, (with Kane and Marcus) is the market leader and is used in the certification programs of the CFA Institute and the Society of Actuaries.[4] Bodie's work has centered on pension finance and investment strategy.[5] He continues to do consulting work and media interviews.[3]

Zvi Bodie
Born (1943-04-27) April 27, 1943
CitizenshipU.S.
Doctoral
advisor		Stanley Fischer[1]

Education and background

Bodie holds a Ph.D in economics (1975) from the Massachusetts Institute of Technology, a M.A. in Economics (1970) from the Hebrew University, and a B.A. with Honors in Philosophy (1965) from Brooklyn College.[2][4]

He has served on the finance faculty at the Harvard Business School and MIT Sloan School of Management.[6] Bodie was on the editorial board of the Journal of Pension Economics and Finance, and served as an advisory member to the World Bank Project on Old Age Security.[7] He was also a consultant to the State of Israel concerning reform of their pension system.[3]

In 2007 the Retirement Income Industry Association gave Bodie their Lifetime Achievement Award for applied research,[8] and in 2019 he received the Plan Sponsor Council of America's Lifetime Achievement Award.[9] He also won the Financial Analysts Journal Graham and Dodd Scroll in 1985 and 1996.[4]

Investment philosophy

Bodie, an expert on retirement and financial economics, is a long-time advocate of diversity and "safety-first investing."[3][10] In 1995 he offered a warning about the risks of investing heavily in stocks, in a journal article: On the Risk of Stocks in the Long Run.[11]

In 2003, he spoke again, about investing too heavily in the stock market, saying "people who have been following conventional investment advice are probably taking more risk than they should and don't even know it. They've been told not to worry about the stock market going down because in the long-run, stocks are going to beat everything else. That's a fundamental fallacy."[12]

After the stock market crash of 2007--2008, in a 2009 interview, he advised:

"Unless you have the heart of a high stakes gambler, get out of stocks now and put your retirement money in inflation protected government bonds and similar instruments. These investments are immune to the kind of calamity Wall Street experienced last year, and they are guaranteed to keep pace with inflation, a potential problem in the future."

Bodie added "he follow[ed] his own advice and did not lose a penny in the recent market meltdown.[13]

Prior to, and during, the 2020 COVID-19 pandemic, he offered advice on how people can use the principles of risk management to protect their investments, and plan for unforeseen risks.[3][10] Bodie prescribes a diversified portfolio that includes products with guaranteed returns such as government bonds and traditional retirement plans that assure a minimum interest rate.[3]

His investment strategy consists of a five-step process to analyze and evaluate what kinds of risks one faces, and how to determine the best way to implement an investment plan.[10]

Bodies' five-step plan consists of Risk identification, Risk assessment, Selection of risk-management techniques, Implementation, and Review; the five steps are then followed by a four-step process[10]of:

  • Diversifying: owning diversified risky assets to avoid undue risk.
  • Hedging: taking less risk and giving up upside; an example is buying I savings bonds (inflation-linked bonds that protect investor purchasing power) to offset the risk of stocks.
  • Insuring: paying someone else to pay you if something bad happens, while keeping the upside in good times; an example is a put option on the stock market, a contract that ensures you can sell stocks at a prespecified price.
  • Saving for emergencies: keeping an emergency fund of liquid savings for the unexpected.

Bodie has promoted his system of investment and retirement planning in numerous interviews on PBS, CNN and other media outlets over the years.[14][15][16][17]

Bibliography

Bodie has authored and co-authored multiple books and textbooks,[18] and his written works have focused on pension finance and investment strategy. Some of his work is listed below.[5][18]

Books
  • The Foundations of Pension Finance, (with E.P. Davis), Edward Elgar Publishing, 2000.[19]
  • Pensions in the U.S. Economy, (with John B. Shoven and David A. Wise), University of Chicago Press, 1988.[20]
  • Issues in Pension Economics, (with John B. Shoven and David A. Wise), University of Chicago Press, 1987.[21]
  • Financial Aspects of the U.S. Pension System, (with John B. Shoven, 3rd edition, 2010.[22]

Textbooks
  • Essentials of Investments, (with Alex Kane and Alan Marcus), McGraw-Hill/Irwind, 11th edition, 2019.
  • Investments, (with Alex Kane and Alan Marcus), McGraw-Hill, 11th edition, 2012.
  • Risk Less and Prosper: Your Guide to Safer Investing, (with Rachelle Taqqu), Jon Wiley & Sons, 2011.
  • The Future of Life Cycle Savings and Investing, (with Dennis McLeavy and Laurence B. Siegel), Research Foundation of CFA Institute, 2009.
  • Financial Economics, (with Robert Merton and David Cleeton), Prentice Hall, 2nd edition, 2008.
  • Worry-Free Investing: A Safe Approach to Achieving Your Lifetime Goals, (with Michael J. Clowes), Financial Times/Prentice Hall, 1st edition, 2003.

Journal articles
  • "On the Risk of Stocks in the Long Run," Financial Analysts Journal, Volume 51, Issue 3, 1995.[11]
  • "Risk and Return in Commodity Futures," Financial Analysts Journal, Volume 36, Issue 3, with Victor I. Rosansky, 1980.[25]
  • "Common Stocks as a Hedge Against Inflation," The Journal of Finance, Volume 31, Issue 2, 1976.[26]

References
  1. Bodie, Zvi (1975). Hedging against inflation (Ph.D.). MIT. Retrieved 23 May 2017.
  2. "About - Zvi Brodie". www.amazon.com. Retrieved 2020-09-29.
  3. "Retirement Savings Hit Hard by COVID-19? Here's What to Do Next". Boston University. Retrieved 2020-09-29.
  4. "Zvi Bodie". Archived from the original on August 18, 2004. Retrieved June 14, 2010.
  5. "Zvi Bodie". 2010-08-18. Archived from the original on 2010-08-18. Retrieved 2020-09-29.
  6. "Zvi Bodie | TIAA Institute". www.tiaainstitute.org. Retrieved 2020-09-29.
  7. "Old Age Income Support in the 21st Century: The World Bank's Perspective on Pension Systems and Reform".
  8. "PSCA Honors Zvi Bodie With Lifetime Achievement Award". Plan Sponsor Council of America. 2019-11-20. Retrieved 2020-09-29.
  9. "Boston University's Zvi Bodie to receive PSCA's Lifetime Achievement Award". Pensions & Investments. 2019-03-11. Retrieved 2020-09-30.
  10. "Conversations with E21: Zvi Bodie on How to Make Sense of Markets in the Time of Coronavirus". Economics21. 2020-04-06. Retrieved 2020-09-30.
  11. Bodie, Zvi (1995-05-01). "On the Risk of Stocks in the Long Run". Financial Analysts Journal. 51 (3): 18–22. doi:10.2469/faj.v51.n3.1901. ISSN 0015-198X.
  12. "BW Online | July 28, 2003 | Online Extra: Sleep Soundly without Stocks". 2011-06-20. Archived from the original on 2011-06-20. Retrieved 2020-09-30.
  13. "Sell Your Stocks, MIT Sloan Professor Urges Small Investors Saving for Retirement". www.businesswire.com. 2009-03-12. Retrieved 2020-09-30.
  14. Tarquinio, J. Alex (2009-04-01). "A Hedge Against Inflation". The New York Times. ISSN 0362-4331. Retrieved 2020-09-30.
  15. "As the markets swing, should you be freaking out about your 401K?". PBS NewsHour. 2018-04-03. Retrieved 2020-09-30.
  16. "Economist Zvi Bodie debunks standard investment advice - Sep. 16, 2009". money.cnn.com. Retrieved 2020-09-30.
  17. Geer, Carolyn T. (2012-03-04). "How Much You Need vs. How Much You Can Lose". Wall Street Journal. ISSN 0099-9660. Retrieved 2020-09-30.
  18. "Books". Zvi Bodie. Retrieved 2020-09-29.
  19. [email protected] (2000). The Foundations of Pension Finance. Two volume set. Edward Elgar Publishing.
  20. Bodie, Zvi; Shoven, John B.; Wise, David A. (1988-01-01). "Pensions in the U.S. Economy". Cite journal requires |journal= (help)
  21. Bodie, Zvi; Shoven, John B.; Wise, David A. (1987-01-01). "Issues in Pension Economics". Cite journal requires |journal= (help)
  22. "Financial Aspects of the United States Pension System". www.goodreads.com. Retrieved 2020-09-29.
  23. Jin, Li; Merton, Robert C.; Bodie, Zvi (2006-07-01). "Do a firm's equity returns reflect the risk of its pension plan?". Journal of Financial Economics. 81 (1): 1–26. doi:10.1016/j.jfineco.2005.06.005. ISSN 0304-405X.
  24. Bodie, Zvi; Crane, Dwight B. (1997-11-01). "Personal Investing: Advice, Theory, and Evidence". Financial Analysts Journal. 53 (6): 13–23. doi:10.2469/faj.v53.n6.2126. ISSN 0015-198X.
  25. Bodie, Zvi; Rosansky, Victor I. (1980-05-01). "Risk and Return in Commodity Futures". Financial Analysts Journal. 36 (3): 27–39. doi:10.2469/faj.v36.n3.27. ISSN 0015-198X.
  26. Bodie, Zvi (1976). "Common Stocks as a Hedge Against Inflation". The Journal of Finance. 31 (2): 459–470. doi:10.1111/j.1540-6261.1976.tb01899.x. ISSN 1540-6261.
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