Identification Strategies in Finance

FIN533 Identification Strategies in Finance

  • Topics

    Topics

    • Course Introduction Endogeneity & Treatment Effects Framework
    • Empirical Methods I & II: Difference-in-Differences & LATE Estimators
    • Empirical Methods II & III: Instrumental Variables & Regression Discontinuity Design
    • Empirical Methods III: Matching Estimators

  • Learning outcome

    Learning outcome

    This is a PhD level course covering modern empirical work in Finance. For concreteness, the course is designed to help students understand how to operationalize empirical research on topics that are central to empirical finance, including the widely used identification strategies: Treatment Effects, Difference in Differences (DiD), Instrument Variables (IV), Regression Discontinuity Design (RDD) and Matching Methods. The overarching goal is to expose students to "state-of-the-art" empirical research methods and prepare them to conduct their own work using new tools.

  • Teaching

    Teaching

    Lectures and discussions. There will be six two-hour lectures within one week, discussing the widely used identification strategies: Treatment Effects, Difference in Differences (DiD), Instrument Variables (IV), Regression Discontinuity Design (RDD) and Matching Methods.

  • Assessment

    Assessment

    Evaluation is based on the term paper using ideas and techniques discussed in the course.

  • Grading Scale

    Grading Scale

    Pass/Fail

  • Computer tools

    Computer tools

    None

  • Literature

    Literature

    There is no required textbook. Readings will be based on articles. The readings are all available for free on the web (e.g., from JSTOR, SSRN, the journal¿s website, or authors¿ websites).

    Students themselves should locate listed articles. Papers anteceded by an asterisk (*) are strongly recommended and covered during lectures.

     

    Almeida, H. and M. Campello, 2007, ¿Financial Constraints, Asset Tangibility, and Corporate Investment,¿ Review of Financial Studies 20, 1429-1460.

     

    (*) Bertrand, M. and S. Mullainathan, 2003, ¿Enjoying the Quiet Life? Corporate Governance and Managerial Preferences,¿ Journal of Political Economy 111, 1043-1075.

    Besley, T. and A. Case, 2000, ¿Unnatural Experiments? Estimating the Incidence of Endogenous Policies,¿

    Economic Journal 110, 672-694.

     

    (*) Blanchard, O., F. Lopez-de-Silanes, and A. Shleifer, 1994, ¿What do Firms do with Cash Windfalls?¿

    Journal of Financial Economics 36, 337-360.

     

    (*) Butler, A. and J. Cornaggia, 2011, ¿Does Access to External Finance Improve Productivity? Evidence from a Natural Experiment,¿ Journal of Financial Economics 99, 184-203.

     

    (*) Campello, M. and J. Graham, 2012, ¿Do Stock Prices Influence Corporate Decisions? Evidence from the Technology Bubble,¿ forthcoming, Journal of Financial Economics.

     

    Heckman, J., Lalonde, R., Smith, J., 1999, Handbook of Labor Economics, Vol. 3, O. Ashenfelter, and D. Card, eds. Lesevier North-Holland, Amsterdam.

     

    Imbens, G., 2003, ¿Nonparametric Estimation of Average Treatment Effects under Exogeneity: A Review¿, NBER Technical Working Paper #294.

     

    (*) Jayaratne, J. and P. Strahan, 1996, ¿The Finance-Growth Nexus: Evidence from Bank Branch Deregulation,¿ Quarterly Journal of Economics 111, 639-670.

     

    (*) LaPorta, R, F. Lopez-De-Silanes, A. Shleifer, R. Vishny, 1998, ¿Legal Determinants of External Finance.¿ Journal of Finance 52, 1131-1150.

     

    Rosenzweig, M. and K. Wolpin, 2000, ¿Natural `Natural Experiments' in Economics,¿ Journal of Economic Literature 38, 827-874.

     

    Tang, T., 2009, ¿Information Asymmetry and Firms¿ Credit Market Access: Evidence from Moody¿s Credit Rating Format Refinement,¿¿ Journal of Financial Economics 93, 325-351.

     

    Wooldridge, J. M., 2002, Econometric Analysis of Cross Section and Panel Data, MIT Press. Cambridge, Mass. (Chapters 6, 10, and 18.)

     

    Abadie, A., D. Drukker, J. Herr, and G. Imbens, 2004, ¿Implementing matching estimators for average treatment effects in Stata,¿ Stata Journal 4, 290-311.

     

    Abadie, A. and G. Imbens, 2002, ¿Simple and Bias-Corrected Matching Estimators for Average Treatment Effects,¿ Working Paper.

     

    (*) Almeida, H., M. Campello, B. Laranjeira, and S. Weisbenner, 2011, ¿Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis,¿ Critical Finance Review 1, 3-40.

     

    (*) Angrist, J., 1990, ¿Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records,¿ American Economic Review 80, 313-336.

     

    Angrist, J. and V. Lavy, 1999, ¿Using Maimonides¿ Rule To Estimate The Effect Of Class Size On Scholastic Achievement,¿ Quarterly Journal of Economics 114, 533-575

     

    Becker, S. and A. Ichino, 2002, ¿Estimation of Average Treatment Effects Based on Propensity Scores,¿

    Stata Journal 2, 358-377.

     

    (*) Bennedsen, M., K. Nielsen, F. Pérez-González, and D. Wolfenzon, 2007, ¿Inside the Family Firm: The Role of Families in Succession Decisions and Performance,¿ Quarterly Journal of Economics 122, 647- 691.

    Chava, S. and A. Purnanandam, 2011, ¿The Effect of Banking Crisis on Bank-Dependent Borrowers,¿ Journal of Financial Economics 99, 116-135.

     

    (*) Chava, S. and M. Roberts, 2008, ¿How does Financing Impact Investment? The Role of Debt Covenants,¿ Journal of Finance 63, 2085-2121

     

    Dehejia, R. and S. Wahba, 1999, ¿Causal Effects in Nonexperimental Studies: Reevaluating the Evaluation of Training Programs,¿ JASA 94, 1053-1062.

     

    Dehejia, R. and S. Wahba, 2002, ¿Propensity Score Matching Methods for Non-Experimental Causal Studies,¿ Review of Economics and Statistics 84, 151-161.

     

    Imbens, G. and T. Lemieux, 2008, ¿Regression Discontinuity Designs: A Guide to Practice,¿ Journal of Econometrics 142, 615-635.

     

    Lee, S., 2008, ¿Randomized Experiments from Non-Random Selection in U.S. House Elections,¿ Journal of Econometrics 142, 675-697.

     

    (*) Malmendier, U. and G. Tate, 2009, ¿Superstar CEOs,¿ Quarterly Journal of Economics 124, 1593- 1638.

     

    (*) Rauh, J., 2006, ¿Investment and Financing Constraints: Evidence from the Funding of Corporate Pension Plans.¿ Journal of Finance 61, 33-71.

Overview

ECTS Credits
3
Teaching language
English
Semester
Autumn

Course responsible

Murillo Campello, Cornell University.