Dissertation and more

Dissertation and more

Discussion

Dissertation

  • research proposal
  • initial assignment of a supervisor
  • deadlines and meetings

More

  • the past term
  • the current term
  • f2f activities during term 2
  • AOB that may you may want to raise

King s Investment Fund project (portfolio construction module)

The research proposal

 

This presentation outlines the creation of the research proposal

Via the research proposal we allocate you to one supervisor, and then you liaise with them for the dissertation

8+8 topics (will present them in short today).

Data Analysis for research introduces the topics on a weekly basis.

During Data Analysis for Research each of the topics is presented in detail building on Stata.

This module is to help you choosing the dissertation topic and to write the research proposal

Each week Dario will presents the topics using Stata.

For each lecture students will be given handouts with routines.

You may choose to come and see all the topics, or only those you are interested in.

You can submit the research proposal by the 17th May the 7th June

You will     ll in the     proposal form .

On KEATS, during the reading week, you will nd the three pages research proposal form, 1000-3000 words, where yuo give:

Introduction: give a motivation of the issue and explain how you will address the question. Give a structure of the work (one page)

Literature Review: overview of the main contributions to the subject you are examining (one page).

Methodology: discuss your choice of the statistical model, explain and justify the estimation method (half page).

Main References: main references used to write the research proposal (max 10 ref).

 

Initial meeting

Using the research proposal we assign an initial supervisor.

You will meet soon soon after exams

You meet, and if you are happy you begin working together.

If not, you came back to us and we look for another supervisor.

Can change the topic at any time if you want (This will be decided by you and the supervisor).

We will provide a guide on how to write a dissertation with all the relevant details.

Topics areas

Topic 1: Immigration

Topic 2: Monetary and     scal policy

Topic 3: Political economy

Topic 4: International trade

Topic 5: Economic growth

Topic 6: Macroeconomics/international macroeconomics

Topic 7: Economic forecasting and nowcasting

Topic 8: Time Series Econometrics

 

Topics: Finance

Topic 1: Macroeconomics and     nance.

Monetary policy and the stock market

Topic 2: International nance. Does the purchase power parity hold? Topic 3: Behavioural    nance. The e¢ cient capital market hypothesis

Topic 4: Risk management.

Volatility forecasting and the nancial market Topic 5: Corporate nance.

Financial policies and the value of the      rm Topic 6: Asset management.

Investment models and imperfections in capital markets Topic 7: Banking competition and crisis.

Equilibrium and competition in the banking sector Topic 8: Portfolio construction.

Pairs trading: Can the market be systematically beaten?

Own Topic Discuss with Leone after seeing the above

The research proposal: an example

Pick one topic

Interest!!!!

Pick the area you are interested in: Topic 7, say

Choose a potential broad title: “Will the Basel Accords Promote Financial Stability?”

Page 1

 

Describe the broad area of study (two sentences).

FOR EXAMPLE: This thesis will examine the extent to which international nancial regulation, paying particular attention to the Basel Accords, helps to ensure   nancial stability at a global level. This aim is pursued by the Basel Accords through the promotion of a sound banking system with rules regarding both the optimal level of capital that banks should hold (Pillar I) and a complementary supervisory review on the banks compliance to the capital requirement rules (Pillar II), and also market discipline via disclosure (Pillar III).

FOR EXAMPLE: However, recent research provides empirical evidence which is somewhat inconsistent with the above-mentioned aim (REFERENCE). It can be seen that heavy banking regulation and supervision may lead to        nancial instability (BECAUSE OF SOME REASONS/SOME PHENOMENON YOU HAVE INDIVIDUATED).

EXPLAIN IN ANOTHER SENTENCE THIS REASON/PHENOMENON.

Why this area has been chosen (2 sentences).

FOR EXAMPLE: The issue is important as well as topical because, in the aftermath of the 2007     nancial crisis, there is the quest for new      nancial regulation for the purpose of avoiding further crisis phenomena. Nowadays, the main concern is how to ful l this task because, on one hand, it is thought that stricter capital requirements and stronger supervision are called for, and, on the other hand, it should not be ignored that eventual over-regulation can potentially dampen economic growth exactly when the latter is needed most. In order to build up an appropriately-tailored regulation, a deeper understanding of what went wrong is essential.

The research questions which are linked to the problem (2 sentences).

FOR EXAMPLE: The particular questions which this research addresses come from these empirical studies. I ask:

HERE YOU SHOULD FORMULATE (VERY CLEARLY) YOUR RESEARCH QUESTIONS:

WHAT YOUR RESEARCH IS CARRIED ON FOR?

WHAT ARE THE HYPOTHESIS YOU THINK IS WORTH TO FORMULATE?

THESE QUESTIONS MUST BE CONSISTENT WITH THE PROBLEMS

YOU HAD HIGHLIGHTED IN THE PREVIUOS SECTION (A KIND OF

CONSEQUENCE OF IT). MOTIVATION AND RESEARCH QUESTION

ARE THE MOST IMPORTANT PART OF YOUR PROPOSAL

What the implications of the      ndings are likely to be (2 sentences) FOR EXAMPLE: If my arguments are supported by empirical results, the ndings may contribute to the existing literature in many directions…

OR in    lling a gap in the literature on that topic…

OR they may shed light on another factor to be taken into account in that eld…

OR may contribute to the debate regarding the speci c topic you are dealing with…

OR they may suggest some policy recommendations….

 

Page 2

Theoretical framework and motivation

What theoretical framework/lens will be used (2 sentences)

IT IS THE THEORETICAL BASE/FRAMEWORK/LENS/APPROACH THESE TERMS ARE INTERCHANGEBLE FOR THESE PURPOSES.

THE THEORETICAL APPROACH MAY JUSTIFY THE PROPOSITIONS

POSED IN YOUR QUESTIONS OR IT MAY BE A BASIS FOR

ANALYSING THE DATA OR THE LETERATURE WHICH ARE

EXAMINING IN ORDER TO ANWER THE QUESTIONTHAT DEPENDS

ON THE TYPE OF DISSERTATION BEING WRITTEN. THE ONLY THING THAT METTERS IS BEING ABLE TO SHOW THAT THERE IS SOME THEORETICAL GROUNDING TO THE DISSERTATION.

MOTIVATION IN DETAIL COMPARED WITH THE EXISTING LITERATURE.

Page 3

Empirical framework

Link questions to theory and how these questions are going to be answered (2 sentences)

HERE YOU SHOULD EXPLAIN THE METHOD AND THE

METHODOLOGY YOU ARE GOING TO USE. THERE IS NO NEED TO

GO THROUGH VERY DETAILED (FOR THE TIME BEING). ARE YOU THINKING ABOUT A PARTICULAR MODEL? A PARTICULAR ESTIMATOR?

FOR EXAMPLE: I will answer these questions by applying an empirical research method which involves both qualitative and quantitative analysis, and implies an interdisciplinary approach…ETC…

 

Empirical framework

Why these methods have been chosen (2 sentences)

FOR EXAMPLE: In order to explain why this is the most appropriate

method… YOU SHOULD ASK YOURSELF, HOW THE METHOD YOU HAVE CHOSEN HELPS YOU IN ANSWERING YOUR QUESTION/S.

Add 4 to 5 references (maximum 10).

Topics for    nance path

Macroeconomics and  nance

Topic: Macro nance.

Econometric tools: Regression analysis, time series models.

Initial readings:

Fuhrer, J. and G. Tootell (2008),           Eyes on the prize: How did the FED respond to the stock market? , Journal of Monetary Economics, 55: 796-805.

Bernanke, B. S. and M. Gertler (2001),         Should Central Banks Respond to Movements in Asset Prices? , American Economic Review, 91: 253-257.

Data: Quarterly data on federal funds rate, price index, GDP and stock price index for the US.

 

Macroeconomics and  nance

Aim: Test the hypothesis that monetary policy responds to stock market movements.

Proposed project: Monetary policy and the stock market: the role of central banking

Explain the arguments in favour and against responses to stock market movements;

Summarize the results of the empirical literature;

Derive the null hypothesis to test;

De ne the empirical framework;

Test for the hypothesis you have derived.

International   nance

Topic: International     nance.

Econometric tools: Time series methods for nonstationary variables.

Initial readings:

Froot, K. A. and K. Rogo⁄. (1994),           Perspectives on PPP and Long-Run Real Exchange Rates , NBER Working Paper Series, WP4952.

  1. Engel (2000), Long-Run PPP May Not Hold After All , Journal of International Economics 57, 243-273.

Data: Quarterly data on exchange rates and prices between 1960 and 2014 for a large number countries.

International   nance

Aim: Test the hypothesis that the PPP theory holds for a given pair of countries.

Proposed project: Does the purchase power parity hold?

Explain the economic/ nance theory behind the

Purchasing Power Parity theory;

Summarize the results of the empirical literature on

PPP;

Derive the null hypothesis to test; De ne the empirical framework; Test for the PPP.

Behavioural   nance

Topic: Behavioural     nance.

Econometric tools: Time series methods for nonstationary variables.

Initial readings:

  1. Engel (1996), The forward discount anomaly and the risk premium: A survey of recent evidence , Journal of Empirical Finance, 3: 123-192.

Baillie, R.T., Bollerslev T (2000),                                                      The Forward

Premium Anomaly Is Not As Bad As You Think . Journal of International Money and Finance 19, 471-488.

Data: Monthly data on forward and spot rate for US and UK.

Behavioural   nance

Aim: Test the hypothesis that capital markets are e¢ cient.

Proposed project: The e¢ cient capital market hypothesis

Explain the economic theory behind the E¢ cient Market Hypothesis;

Summarize the results of the empirical literature on the

EMH;

Derive the null hypothesis to test; De ne the empirical framework; Test for the EMH.

Risk management

Topic: Volatility in     nancial markets.

Econometric tools: Alternative ARCH and GARCH models.

Initial readings:

Hansen, P.R. and Lunde, A., (2005),                                                            A Forecast

Comparison of Volatility Models: Does Anything Beat a GARCH(1,1)? , Journal of Applied Econometrics, 20, 873-889.

Bauwens, L., Laurent, S., Rombouts, J.V.K. (2006). Multivariate GARCH models: a survey. Journal of Applied Econometrics , 21, 79-109.

Data: Data provided by the journal.

Risk management

Aim: Test the hypothesis that GARCH(1,1) is empirically superior to more re ned models.

Proposed project: Volatility forecasting and the                                                        nancial market

Describe ARCH and GARCH models;

Describe data sets;

Estimate Alternative ARCH and GARCH models; De ne a criterion to compare e¢ ciency of models; Compare models.

Corporate   nance

Topic: Corporate     nance.

Econometric tools: Probit/Logit estimators.

Initial readings:

Iona, A., Leonida, L. (2016),         Determinants of         nancial conservatism: evidence from a pre-crisis , Corporate Governance: An international Review, 1:187-210.

Altman, E.I., Haldeman, R.G., Narayanan, P. (1977.), Zeta analysis: a new model to identify bankruptcy risk of corporations . Journal of Banking and Finance 1, 29-54.

Data: Data on an unbalanced panel of non- nancial UK and US rms from 1990 to 2013.

Corporate   nance

Aim: Investigate whether   nancial conservative policies depend on nancial distress.

Proposed project: Financial policies and the value of the                                                              rm

Describe the theory                          nancially conservative policies;

Individuate a group (some groups) of           rms which are nancially conservative;

Use test for di⁄erence in mean to test whether the grouping criterion you have chosen works; Build up a dummy and test whether some basic relationships are di⁄erent for this group of               rms; Use logit/probit/regression analysis to test the hypothesis that the group of               rms you have selected is distressed/conservative.

Asset management

Topic: Corporate investment, Financial market imperfections.

Econometric tools: Alternative panel data estimators.

Readings:

Fazzari, S.M., Hubbard, R.G. and Petersen, B.C. (1988), Financing constraints and corporate investment , Brookings Papers on Economic Activity 1, 141-195.  Kaplan, S.N. and Zingales, L. (1997),               Do investment-cash               ow sensitivities provide useful measures of               nancing constraints? , Quarterly Journal of Economics 112, 169-215.

Data: Data on an unbalanced panel of non- nancial UK and US rms from 1990 to 2013.

Asset management

Aim: Test the hypothesis that   nancially constrained groups of rms have higher cash    ow sensitivities with respect to nancially unconstrained ones.

Proposed project: Investment models and imperfections in capital markets

Describe the models behind                                             nancing constraints;

De ne nancially constrained sub-groups of              rm;

Estimate the cash ow sensitivity for all sub groups; Build a test for the null hypothesis that coe¢ cients does not vary across classes of rms;

Check that your criterion e⁄ectively capture nancially constrained rms.

Banking competition and crisis

Topic: Banking, Industrial organization.

Econometric tools: Alternative panel data estimators.

Initial readings:

Panzar, J.C., Rosse, J.N., (1987),           Testing for monopoly equilibrium , Journal of Industrial Economics, 35, pp 443-456.

Goddard, J., Wilson, J., (2009),           Competition in banking: A disequilibrium approach , Journal of Banking and Finance, 33, pp 2282-2292.

Data: Data on an unbalanced panel of banks for all economies in the world.

Banking competition and crisis

Aim: Use the Panzar and Rosse statistic to test for competition in the banking industry.

Proposed project: Equilibrium and competition in the banking sector

Describe the Panzar and Rosse theory of competition; Individuate a group (some groups) of banks which are likely to face more (or less) competition;

Use test for di⁄erence in mean to test whether the grouping criterion you have chosen works; Build up a dummy and test whether some basic relationships are di⁄erent for this group of               rms; Use panel data regression to test for the degree of competition of the group of  rms you have selected.

Portfolio management

Topic: Portfolio management

Econometric tools: Alternative OLS models/routines building

Initial readings:

Gatev, E., Goetzman, W. N.,                                           Rouwenhorst, K. G.,

  1. Pairs trading: performance of a Relative- Value Arbitrage Rule . Review of Financial Studies 19, 797-827.

Schmidt, A. D., 2008. Pairs trading: A cointegration approach . University of Sidney. Vidyamurthy, G., 2004. Pairs trading: Quantitative methods and analysis. Wiley.

Data: Data on assets prices.

Portfolio management

Aim: Test the hypothesis that pairs trading strategy beat the market

Proposed project: Pairs trading: Can the market be systematically beaten?

Describe the pairs trading strategy;

Individuate a pair (some pairs) of assets;

Use test for di⁄erence in mean to test whether the pairs you have chosen work as a pair;

Build up pairs using di⁄erent criteria than proposed in the literature;

Use regression analysis to test the alternative strategies.

Your own topic

You are allowed to develop a topic of your own if you want to.

This does not necessarily lead to a higher grade. Discuss the topic with Leone/Evangelos Pa lis.

If you want so as all others you need:

A proper research project (3/4 pages with the structure of the dissertation, from which the null hypothesis you are testing can be clearly extracted);

Evidence that you know where to       nd dataset you are going to use (the data must be ready when other data are released);

Evidence that you know the software you are going to use (if di⁄erent from STATA or MATLAB).

 

Other business

Discussion

Other business

  • the past term
  • the current term
  • f2f activities during term 2
  • AOB that may you may want to raise the King s Investment Fund project (portfolio construction module)

The King s investment Fund

King s Investment Portfolio: Introduction

The King s Investment Fund is an LTD company that was set up in 2017

It is incorporated as a private company limited by guarantee under the name of K.C. Students Investment Club Limited (10657835)

The company is student driven!

The CEO is Leone Leonida

Suman Koirala is the accountant

Oskar Pulkinen, Shohom Roy, Alon Kaye

 

Aim

Dissemination of knowledge for undergraduate and postgraduate students at King s Business School and about investment, risk management and hedging strategies

The dissemination strategy builds upon both learning by doing practices and the teaching component of middle management. With these aims, KIF is entirely student-run investment fund

It is providing students with hands-on experience in investment research, valuation and portfolio management

Students enrolling into the program acquire skills necessary to be competitive and knowledgeable in the    nancial services industry and to make an informed contribution both to academia and the industry

Structure

The school has donated £ 20,000 as an investment into the fund

We have a KEATS page (not updated yet)

Portfolio construction by Francesco Ciriachi

Recorded lectures (will begin on monday)

There will be classes

Structure

In the equilibrium setup is meant to be composed of two funds: one focused on equities and one with emphasis on automated (algorithmic) trading

The organization is overseen by an Investment Committee, which meets quarterly with the CEO to review investments and procedures and is composed by representatives from academia and the industry

Most of the funds directed into KIF are allocated across our funds and all investments into the fund are considered donations

The initial fund to be invested comes from the School as a donation

The school has committed £ 20,000 as an initial investment into the fund. Every year the school will donate additional £ 10,000

Strategy

KIF adopts long only investment strategies to allocate funds into selected asset classes and pursues short to medium term capital gains

It provides members with tools, education and advice necessary to learn about analysing asset classes, sectors and nancial markets, giving students the chance to familiarize themselves with the nancial world and to apply their academic knowledge of nance and economics to real-world markets

Members have the opportunity to explore career options by experiencing real-world work in the roles of Group Coordinator, Equity Analyst, Equity

Risk Analyst and Fundamental and Technical Analyst

Roles

Group structure:

Group Coordinator

Equity Analyst

Equity Risk Analyst

Presenter

Fundamental and Technical Analysts

Competition

Potential approach

Each group submit one report that describes the performance of the investment (cover + three pages)

Investments are evaluated by risk-adjusted performance (sharp ratio) and quality of the report. We decide top 5/7 investments

Stock picking competition (networking event). The 5/7 groups present to a panel of senior professionals from the  nance industry the investment you propose. There is a group winning

Buy the portfolio

Rebalancing activity (for those interested)

Group Coordinator (GC)

Each group can choose a Group Coordinator who is the spokesperson for the Group and who keeps in the group working closely together and forms the direct contact with the KIP board members

The Group Coordinator sends requests and questions to faculty if there are any problems or di¢ culties and is also responsible for collating research information and making sure that documents are prepared and sent to faculty in time for the deadlines

Equity Analysts (EA)

The Equity Analyst s role is to     rst focus on the relationship between the chosen investment and the company fundamentals

The EA performs the equity valuation analysis creating spreadsheets using the KIF Saturday workshops content and models the investment choices

The EA also explores how the investment shapes up to its peer group through relative analysis, establishes a clear company pro le of management, what businesses the company involved in and how are those each performing and the company future plans

Equity Risk Analysts (ERA)

The role of an Equity Risk Analyst is to understand all the external, and internal company risks that may interfere with the successful deployment of the investment strategy

For example, one of the key internal risks that is often overlooked by analysts is the prospect of senior management changes

Arguably, management, rather than fundamentals, is the key to the future success of a company so there needs to be good understanding of the roles undertaken by management and their suitability. Some of the major external risks in uencing investment decisions are unexpected currency devaluation, government monetary policy changes and natural disaster

Fundamental and Technical Analysts (FTA)

The role of a Fundamental and Technical Analyst is to focus on the relationship between the fundamental company information (provided by the EA) and the technical analysis of the price movements

In addition, the FTA examines the sector analysis of the stock and establishes if the stock is in a rising or falling sector relative to the business cycle. This is important information and may ultimately in uence the choice of stock

Competition

Funny

Each group submit one report that describes the performance of the investment (cover + three pages)

Investments are evaluated by risk-adjusted performance (sharp ratio) and quality of the report. We decide top 5/7 investments

Observation period: june and july maybe

Stock picking competition (networking event). The 5/7 groups present to a panel of senior professionals from the  nance industry the investment you propose. There is a group winning

Buy the portfolio

Rebalancing activity (for those interested)

Next steps

If interested:

Enrol in the relevant Keats page

Check that you are in the list in the relevant msc. If you are not in the list, please contact Oskar by monday the 3rd May

Meet with your group and organise the activities

Enjoy the portfolio construction module

End Questions?