Fall 2023 / Mentorship at MIT

MIT Sloan’s David Thesmar Encourages Intellectual Drive

With golf as a backdrop, finance professor Thesmar guides PhD student Tim de Silva in research on the impact of “noise”

By Christine Thielman

When Covid-19 made traditional academic settings impossible for much of 2020, David Thesmar, the Franco Modigliani Professor of Financial Economics at the MIT Sloan School of Management, found a novel way to connect with his mentee, PhD student Tim de Silva SM ’21—over a game of golf.

De Silva had completed the coursework for a PhD in management with a concentration in economics, finance, and accounting and was ready to conduct research. “Having a good advisor plays a really important role in making that transition,” he says. He had taken courses with Thesmar, whose research interests include corporate finance and behavioral economics.

Impressed with his work ethic and intellectual curiosity, Thesmar invited de Silva to work on a project. “Senior faculty usually has the idea,” de Silva says, “and the student helps with grunt work and execution, since they don’t have the skills yet.” In the course of early-stage research discussions, the two discovered they were both avid golfers.

Since by then outdoor activities were known to be safe, “we started playing golf instead of having Zoom meetings,” says de Silva. “Without seeing him in person, I think I might have been lost. Nine holes take two hours, which gives you lots of time between shots to have longer discussions.”

Their research examined the impact of “noise” on financial forecasting. Economists define noise as variability in human decision-making that should yield identical results. For example, according to Thesmar, studies show that a doctor presented with the same patient and symptoms on separate occasions will not necessarily make the same diagnosis each time. Noise is observed in decision-making in fields that include judicial sentencing, hiring, and investing.

Thesmar, with de Silva’s help, analyzed a large data set of profits and forecasts from companies dating back to the early 1990s and was pleased with the energy his student brought to their investigation. “I’ve written quite a few papers with my students, and it’s a two-way learning process: we teach them what is a good question to analyze, while they bring new ideas and new techniques.” Their work resulted in the publication of a paper, “Noise in Expectations: Evidence from Analyst Forecasts.”

They found that forecasts were very noisy, and that the further out people try to forecast, the more influenced by noise they become. Their work may lead analysts to improved accuracy in the future—one practical recommendation they make to reduce noise is to ask several analysts for their opinions, even if they are non-expert, instead of just one. “Taking the average forecast reduces noise,” says Thesmar. “People have called this the ‘wisdom of crowds.’”

“He’s extremely intuitive, and I’m more detail oriented”

De Silva is grateful to have learned from Thesmar at a critical time in his academic development, noting that the shift from taking classes to working full time on research is stressful for graduate students, and that the pandemic exacerbated that uncertainty. “You wake up every morning and think, ‘I don’t have classes or exams and in three years I have to have a dissertation.’” But if there was a golf game with Thesmar on the calendar, “I knew I had to have something to say about the project I was working on with him as well as my own potential dissertation topics.”

The pair worked well together, and while de Silva says they are similar in their research styles, “we also have differences that are very helpful. He’s extremely intuitive, and I’m more detail oriented. Because he has the big-picture view and I’m the one who does more of the execution, that works perfectly.”

Thesmar remarks that as a former athlete (de Silva played golf and trained as a racing driver in high school and college), his mentee is very disciplined. “Athletes learn to delay gratification. They do a lot of work without seeing an immediate payoff,” he says. “That has always impressed me because I am not like that!” He also points out that their roles were reversed on the golf course: “I am the student and he is the master. Tim’s an amazing player, and I am enthusiastic but very clumsy.”

De Silva acknowledges MIT Sloan’s notably high level of interaction between students and professors. “MIT Sloan professors and students tend to be outgoing and social, and the work is naturally collaborative.” He will enter the academic job market in the spring of 2024 and hopes to join the faculty of a research-focused business school.

His mentor is confident that he will succeed and is grateful to have played a role in his growth. “Mentoring is part of our job, I’ve always thought,” says Thesmar. “It’s not just the research we produce; it’s the students we bring to the world.”