Alan Kraus (In Memoriam)

Alan Kraus, Professor of Finance, UBC, passed away on Saturday, 16 May 2015, peacefully and surrounded by his family. He will be greatly missed by many colleagues and friends who have come to know him in his 45+ years in academia since receiving his Ph.D. from Cornell University in 1965.

Alan’s impact on his friends, his colleagues, at UBC, Stanford University, the University of Washington and Queen’s University, and the profession, has been profound and long-lasting.

Since first arriving at UBC in 1973, Alan has taught undergraduates, MBAs and Ph.D. students. Alan has won several teaching awards, but his impact on doctoral students and the doctoral program at UBC has been perhaps his greatest contribution to teaching. Almost since his arrival at UBC and up until his retirement, Alan taught the most basic foundation course to every Finance Ph.D. student at UBC, the Theory of Finance. So, he greatly helped every student learn the basics of their chosen field, and all the offshoots in finance (banking, corporate finance, asset pricing) build upon the basics that Alan explained so well to so many. His mathematical skill in formulating and solving difficult problems was amazing, topped only by his incredible insights into the intuition underlying the mathematics. That made him a great teacher and mentor.

Alan directed the Ph.D. theses of more than 15 students, giving each incredible insight into very different aspects of finance. That guidance will stay with them for all their careers. These former students include Gordon Sick, Bryan Routledge, Jacob Sagi and Amir Barnea.

That breadth of subject matter studied by his students flowed from Alan’s very broad research interests and he left significant contributions in many areas of finance. He published in the top economics and finance journals for over 40 years, from 1969 to 2010. His paper with Robert Litzenberger on optimal capital structure in a state-preference model in the Journal of Finance in 1973 was a forerunner in both capital structure choice and the use of state-preference modelling in finance. Alan’s work with Litzenberger (JF, 1976, 1983) on asset pricing and skewness preference was ground-breaking in adapting the 2-moment CAPM.

Alan became interested, along with colleague Mike Brennan, in models of asymmetric information and published an innovative look at optimal capital structure in a world with asymmetrically informed agents (JF, 1987). This contrasted with Alan’s modelling of corporate and investor behavior when investors have non-economic portfolio construction biases (“green investing”) and how that affects asset prices and corporate behavior.

Finally, perhaps returning to his “roots,” Alan published work with Jacob Sagi on a preference for flexibility (Journal of Mathematical Economics, 2006) and the existence of unforeseen contingencies (JFE, 2006).

Alan’s contributions were obvious to all his colleagues, and recognized many times. He was an Associate Editor of the JF, JFE, JFQA and Financial Management. He was program chair of the Western Finance Association annual conference in 1985. Alan was also the distinguished speaker at the Western Finance Association meetings in 1993 and the Northern Finance Association meetings in 1992 and 2003.

Alan Kraus will be remembered for his academic achievements, but more so for his warmth and willingness to help his colleagues and friends. He mentored so many of his colleagues at UBC and, along with Professors Mike Brennan and Eduardo Schwartz, set the “culture” still evident in the Finance Division at UBC; collegiality and support of your compatriots is the basic principle that guides us to this day. His good nature and amazing sense of humor will be sorely missed by all of us.

Donations to the Parkinson Society BC or the Alan Kraus Scholarship at the Sauder School of Business at UBC memorial.supporting.ubc.ca/alan-kraus/ are welcomed.