Posted: May 12th, 2022

Quantitative Research Methods in Finance2018/2019Individual Research Project

Quantitative Research Methods in Finance2018/2019Individual Research ProjectDUE DATE: 22 April 2019at 12 noonPlease read this document carefullybefore commencing the project.Choose onekey regressorthatmay determineone of the following firm-level outcomes:-1.Innovation, as measured by research and development expenditures scaled by total assets2.Stock liquidity, as measured by stock turnover (trading volume scaled by number of shares outstanding)Discuss whether and how your chosen determinant(regressor)may affect your chosen outcome(dependent variable). State and test your research questions and hypotheses using a cross-sectionalregression model on two samples of firms, with at least 50 firms in each sample. In addition to appropriate control variables, include at least one dummy variable and one interaction term involving the dummy variable in your analysis.Present your results and discussion in a 2,500-word report.A. What do you need to submit?1.A 2,500-word report (see Section Bfor more details).2.A zip file containing all the data and Stata do/log files that allow a complete replication of all your results (see Section Cfor more details).B. Your reportThink of this report as a “mini research paper”. You will need to perform very similar steps for your dissertation; therefore, use this research project as practice run.Try to follow the structure and writing style of “modern” research paper in Finance (see, for example, papers you have seen in class and those you will come across during your literature review).The final report should be 2,500 words (+/-10% as per School regulations). Note that high quality projects are usually concise.1Your report should have the following sections:-1.Introduction and hypothesis development(600 words)a.Motivate why your research questions you are pursuing is importantb.Discuss what have been done before (i.e. a brief review of the literature)c.Outline your hypothesis. What do you expect to find based on prior theoretical and empirical works.d.Provide a summary of your results. Discuss the most important things you find. Focus on the economic implications of your results.2e.Discuss your contribution to the literature. How does your work differ from what have been done before, and how your results add to the current understanding of the topic.32.Empirical model(400 words)a.Specify your regression models as equations.1The following documents provide some tips for writing a good report: (1) Nikolov, P. (2013). Writing tips for economics research paper. Available at: https://www.appessaywriters.com/write-my-paper/people.fas.harvard.edu/~pnikolov/resources/writingtips.pdf; and (2) Cochrane, J. (2005). Writing tips for PhD students. Available at: https://faculty.chicagobooth.edu/john.cochrane/research/papers/phd_paper_writing.pdf. Not only are these papers useful for this project, they can also be useful when writing your dissertation.2Modern academic papersin Finance usually provide a ‘preview’ of the results and markers of your dissertation will expect to see this. Therefore, we ask that you do the same for this project.3This is going to be difficult, because of the limited scope of your empirical work. However, for this assessment, the contributions do not need to be big or many, they just need to be clearly stated. This is also one of the elements of your dissertation that will carry a substantial weight and you will benefit if you practice early on.
b.Justify the functional forms of your variables and also your choice of control variables.The discussion in this section should be heavilybased on our current understanding regarding the economic relationship between these variables (i.e. the literature!).3.Sample(400 words).a.Describe your data sources and how you construct your sample.b.Discuss your treatment of any data issues (e.g. how you deal with outliers, missing values, etc.).c.Present summary statistics of all your variables and a correlation matrix. Discuss whether what you see are consistent with what you would expect.44.Results and discussion(1,000 words)a.Present your regression resultsb.Discuss your findings in terms of bothstatistical and economic significance. Relate your findings to your hypotheses as well as prior literature.c.Discuss whether your results can reliably be used as evidence for/against your hypothesis. Can there be alternative explanations? Is there any potential violation of OLS assumptions? Carry out specification tests and/or robustness checks as necessary. 5.Conclusion(100 words): Summary of your key findings and takeaway messages.READ THIS:Content of tables/graphs (along with their titles and descriptions), footnotes, and appendices are not includedin the word count. However, all key argumentsmust be presented in the main bodyof the report.Key findings must be included in the main report as professionally formatted tables and graphs. Tables and diagrams must have a title and relevant description. Graph axes must be clearly labelled. Readers should be able to understand all tables and diagrams without referring to the main text.5Although this coursework is classified as a “report”, you are expected to write in complete sentences and well-structured paragraph (and not sentence fragments in bullet points), with introduction and conclusion sections. Headings and subheadings are encouraged. The report must be presented in PDF format. You should use Times New Roman 12-point font, setup your page size to A4 paper, 1-inch (2.54 cm) margins from each side (top, bottom, left, right), 1.5 line spacing, justified margins with footnotes on the same page rather than endnotes. Use the same paragraph format throughout. Number all your pages, tables and diagrams sequentially. These constraints are imposed so as to achieve a standard professional text format and the work maybe penalised if it violates them. C. Data and Stata do/log filesPut everything is a single .zip fileand submit the file electronically. Do not include the print-outs of your do/log files in your report. The original data files (e.g. the original .dta file you download from Compustat, or .xls filewith variablesfrom Capital IQ) must be included in the submission and the .do file you submit must show how the data is cleaned, transformed, and merged into the final data file that you use to conduct your analysis. Please annotateyour do files, such thatotherpeoplebesides youcan understand them,and that the Stata results can be linked to those results inthe report. See tutorial do files for examples.4Students are often not sure what to discuss in this section. You may, for example, compare your summary statistics with those from other similar studies and discuss whether what you obtain is similar (and, if not, what are the potential reasons). This is usually a good exercise, as you can check whether there is anything wrong with your data collection and variable construction.5See http://jfe.rochester.edu/table11.pdf for examples of professionally formatted tables and graphs. Note how these tables are graphs are generally “self-contained” i.e. the readers can understand what these tables and graphs are trying to say without having to refer to the main text of the paper.

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