Bitcoin, cryptocurrency and the blockchain market

Mehdian, S., Stephens, J., & Bush, P. (2020). An Investigation of the Presence of Anomalies in Digital Asset Markets: The Case of Bitcoin. Applied Finance Letters.

In 2008, Satoshi Nakamoto, the pseudonym for the individual (or individuals) behind Bitcoin, outlined a peer-to-peer version of an electronic cash system that would allow online payments to be sent directly from one party to another without going through a financial institution. These cryptocurrencies, like Bitcoin, are part of a blockchain (a distributed ledger or shared database that stores data) and the network required to power it. Data within the blockchain is secured by encryption methods.

Excited to see a new financial asset like Bitcoin emerge and track the currency’s development during its infancy, SOM faculty Seyed Mehdian, PhD professor of finance; John Stephens, DBA, lecturer of accounting and finance; and Peter Bush, DBA, lecturer of accounting & finance, began researching Bitcoin, cryptocurrency and the blockchain market to measure the volatility of the market and assess the behavior of the market relative to established investment options. In other words, they are determining if there are similarities to other financial products and behaviors of the markets.

“There are few times in our academic careers where we see a completely new asset emerge and get to test it using the tools that have been developed over time,” said Stephens. “It is challenging to look at this asset class and hypothesize how it will behave relative to time tested assets like stocks and bonds.”

Some financial professionals have dismissed cryptocurrencies as a passing fad with “no legs in the market.” Because of this, Stephens and his team felt it was important to investigate the asset class “to see if it had merit as a stand alone class or was just a fad as many people think it is.”

During the study, it became clear that the real value was the block chain technology that was being developed and is continuing to evolve.

“Cryptocurrencies themselves are a derivative of the technology, and I think it is important to assess how that technology will be applied in the future of finance and outside of finance as well,” said Stephens. “The world of FinTech (financial technology) is being transformed by the block chain and there are many future innovations that will occur because of it. I would like to make sure our students are positioned to discover some of these innovations and change the way transactions are handled everyday in the world economy.”

WHY I GIVE: Michael G. Rachor establishes a legacy of support for local scholars

Well-respected in the Flint area as a successful financial professional and business owner, Michael G. Rachor hasn’t forgotten what it’s like to struggle. The second oldest of seven children, he was raised during the 1940s and 1950s in a small home on the east side of Flint. His dream was to become an attorney, but he couldn’t afford the high cost of law school tuition.

“My family was always keen on education,” said Rachor. “I thought I wanted to become a lawyer, but it was too expensive. After high school I landed an apprenticeship as a wood patternmaker at Buick Motor Company in Flint. And I became the first in this position to quit and go back to college.”

After witnessing violent interactions during the labor movement, Rachor left General Motors to pursue an associate degree from Flint Junior College (now Mott Community College). Relying on financial support he received from scholarships, he went on to earn his undergraduate and graduate degrees from Michigan State University. This path led to a fulfilling, prosperous career spanning five decades and gave Rachor the financial freedom to accomplish his central purpose in life – helping others achieve their personal and professional goals.

Well-respected in the Flint area as a successful financial professional and business owner, Michael Rachor has started over 175 scholarships to assist with post-secondary education for students attending college in the Flint area–with the majority (over 100) offered at UM-Flint and the McLaren Flint Foundation.

“I wasn’t always a great student – I had to work hard,” said Rachor. “But it was education that moved me forward.”

Rachor moved to San Francisco in 1962 to begin his accounting career with Arthur Andersen, which evolved into one of the world’s largest multinational corporations and was recognized as one of the “Big Five” accounting firms. Shortly after starting a family, he and his wife decided to move back to Michigan. He went on to partner at other accounting firms in the Flint area before establishing Rachor, Purman & Tucker in the late 1970s.

In the 1980s, Rachor met Richard Gilder, a New York philanthropist and founder of the Gilder Lehrman Institute of American History. Gilder earned a degree in history from Yale, and, although he did not have a formal education in finance, he headed the brokerage firm Gilder, Gagnon, Howe & Co whose specialty was trading leveraged stocks and short selling. Inspired by Gilder’s aggressive approach to investment (and his generous spirit), Rachor founded Rachor Investment Advisory Services (Rachor Financial for short) in 1984, and the Rachor Family Foundation (now the Rachor Education Foundation) in 1996.

“Education has always played a pivotal role in my life,” said Rachor. “Even after graduating with my MBA, I took continuing education classes around the world to learn as much as I could about business and finance. My passion for learning sparked my decision to teach accounting courses part time at Mott and UM-Flint. I was one of the only nonPhD holding instructors at the time, and the experience opened my eyes to what a great university we had right here in our city. As a student I relied on scholarships, and I wanted to be able to help others who were struggling like I once did.”

Since establishing the foundation, Rachor has started over 175 scholarships to assist with post-secondary education for students attending college in the Flint area – with the majority (over 100) offered at UM-Flint and the McLaren

Flint Foundation. In addition, there are 80 Rachor Fish Bond Book Scholarships at UM-Flint. While most often a scholarship, once started, goes on to help many students, sometimes there are false starts.

At one point, Rachor established a full-ride scholarship for history majors, with the goal of supporting the education of history teachers in Michigan. He was optimistic that a fully funded education would yield reliable numbers of graduating history teachers. Instead, he became concerned as a surprising number of the recipients ended up changing their majors or moving out of state. Determining that the brief venture into full-ride scholarships was not producing the desired result, he instead settled into what he considered a more effective approach, providing several smaller scholarships with the goal of helping a larger number of people with a portion of their education. Since then, he has established numerous scholarships (most now provide $1,500 annually) to support students facing a myriad of difficulties–financial need, single moms, formerly incarcerated, those switching careers and so forth.

Serving on the Board of Directors are Rachor and his children, Terese M. Rachor-Beste, D.D.S., and James M. Rachor, D.D.S.; and former colleagues Kathleen A. Fox; Laurie P. Torrey

(BBA ‘02) and Tod G. Fisher (BBA ‘96) who eventually bought Rachor Financial in 2009. The board intentionally includes three Rachor family members and three non-family members, comprising three men and three women.

“The Rachor Education Foundation was built on the belief that education (whether through an apprenticeship, community college or at a university) is the key to becoming financially independent; it’s what gives you a leg up to becoming self sufficient,” said Fisher. “While there are other kinds of support out there, we believe it’s ultimately people who need to help other people.

“It’s also important to Mr. Rachor that these scholarships support education happening in the City of Flint. UM-Flint offers a high level of education that’s respected globally –and students don’t have to spend ‘Yale money’ to get it.” While the Foundation continues the scholarships Rachor has started, he intentionally chose to name his scholarships after those he wanted to honor in meaningful ways. The Charles Erickson Rachor Scholarship is especially close to Rachor’s heart. The fund was named after his father, Charles, who had earned a bachelor’s degree from UM-Ann Arbor in 1933 shortly after the Depression and stock market crash. He later enrolled in a graduate (MBA) program but was unable to finish because he was needed to help his mother after his father passed away. Time and time again, he considered returning to school but his own early death ended his dream of finishing up his graduate degree.

“After my father passed away, I wanted to do something to honor his memory,” said Rachor. “I remembered how much he wanted to finish his degree but life kept getting in the way. After some thought, I realized starting a scholarship in his name would be the perfect way to remember him while helping others achieve their goals of completing their MBAs... Since then, I’ve established several others, most named after business partners, as a way of recognizing their contributions and hard work. I’ve also found that naming the scholarships after people creates a human connection between students and the scholarships they

Scholarships established by the Rachor Education Foundation specifically for School of Management students include:

• Jessica Hagemeister

CPA Scholarship

• David A. Page

CPA Scholarship

• Timothy Purman

CPA Scholarship

• Charles Erickson

Rachor Scholarship

• David C. Tucker

CPA Scholarship

• Brenda D. Wood

CPA Scholarship