Scientific Methods in Finance

FIN543 Scientific Methods in Finance

Autumn 2019

Spring 2020
  • Topics

    This course has two parts as follows.

    Part I: Empirical Methods - Recent Applications

    • Introduction to Data Sources for Research in Finance
      • International databases: Compustat, CRSP, SDC Securities, M&As, etc.
      • Norwegian databases: … (Aksel)
      • Hand-collected data…
    • Causality and Endogeneity: Omitted variables; Selection bias; Reverse causality; Measurement error
    • Instrumental variables (IV)
    • Regression discontinuity design (RDD)
    • Matching estimators (ME)
    • Natural experiments

    Part II: How to Develop a Paper in Finance?

    In this part, we try to replicate a paper, and discuss the experience and lessons when developing the paper. In particular,

    • Ideas and early explorations; empirical observations and implications.
    • How did I get coauthors of the project? Why do I invite them? Cooperation among coauthors (data work, design of the tables, writing, intro and abstract)
    • Hypotheses development; empirical design; data sources; sample selection; measures and variables; preliminary results; interpretations; endogeneity concerns; steps to address these concerns…
    • First draft: motivation, hypothesis, empirical tests, references, tables and figures, other appendix…
    • Distribution plan: online posting; conferences; seminars; Issuing as a working paper…
    • Comments, inputs, and new ideas and tests; new drafts; changes of the positioning of the paper…
    • Submissions: submission strategy; referee reports; etc.

  • Learning outcome

    The candidate should, on successfully completing the course, be able to:

    Knowledge:

    • Have an in-depth understanding of the widely used empirical methods in finance. In particular, we look into several recently published papers as examples.
    • Have an in-depth understanding of the important steps to develop a paper: from theory to hypotheses, empirical design, measures, regressions, results and interpretation, addressing endogeneity issues, tables and figures, references, others.

    Skills:

    • Use the methods in this course to develop a research project.
    • Structure and write a finance term paper.
    • Use Stata and Latex in developing a research project.

    Competence:

    • do independent research in finance.

  • Teaching

    PhD in Finance

  • Recommended prerequisites

    Advanced master-level courses such as microeconomics, asset pricing, investment, corporate finance, and econometrics.

  • Requirements for course approval

    Class participation; successfully replicate the project provided by the lecturer

  • Assessment

    Three parts:

    • Class participation (20%)
    • Replication of the given paper (30%)
    • Term paper linked to topics in the course and presentation (50%)

  • Grading Scale

    Grading scale A - F, based on:

    • Class participation (20%)
    • Replication of the given paper (30%)
    • Term paper linked to topics in the course and presentation (50%)

  • Computer tools

    STATA, latex

  • Literature

    No textbook. The course is based on academic articles assigned by the lecturer.

Overview

ECTS Credits
5
Teaching language
English

Course responsible

Associate Professor Xunhua Su, Department of Finance