Abstract
We consider philanthropy by college alums from an innovative and provocative perspective: what if prospective college students were considered members of asset classes with different risk-return combinations? Using forty years of merged admissions-philanthropy records on students at a highly selective liberal arts college, we estimate the simple financial model that this allegory implies. We find benefits to diversification, identify the slope of the market risk-return line, and point out the most (and least) attractive potential students in terms of their projected future donations.
Highlights
Alumni giving has become increasingly important for institutions of higher education, accounting for roughly fifteen percent of all private funding for higher education, or roughly $4 billion (Council for Aid to Education, 2012)
This paper models alumni giving from a unique perspective, treating college admissions decisions as a portfolio choice problem, where prospective students are members of asset classes with rates of risk and return measured a priori by the propensity of each asset class to subsequently donate to their institution
While we do not suggest that admissions decisions are made in this manner, we reflect on the implications of a simple Capital Asset Pricing Model (CAPM) framework using data provided by a selective liberal arts college
Summary
Alumni giving has become increasingly important for institutions of higher education, accounting for roughly fifteen percent of all private funding for higher education, or roughly $4 billion (Council for Aid to Education, 2012). Academic research clearly describes patterns in alumni giving (e.g. Bruggink and Siddiqui,1995; Okunade et al, 1994; Wunnava and Lauze, 2001), identifying descriptive variables that predict philanthropy (Lara and Johnson, 2014; Meer, 2011; Meer and Rosen, 2007; Clotfelter, 2003; Monks, 2003; Cunningham and Cochi-Ficano, 2002; Forbes and Zampelli, 1997; Lindahl and Winship, 1992) Obvious demographic variables such as age, gender, ethnicity, and marital status have been shown to have predictive power, as have activities while in school (major, involvement in college sports, GPA, affiliation with a fraternity or sorority, certain kinds of financial aid) and post-graduation factors (time since graduation, number of relatives at one’s alma mater, reunion years, willingness to share contact information with the college, response to college surveys, highest degree attained, participation in student government, induction into honorary societies, participation in alumni activities)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
