EC906 Term Paper

The term paper is compulsory. You final mark for this module will be the sum of 50% of the term paper mark and 50% of the final exam mark.

Further details of term papers are available in the Postgraduate Economics Handbook.

Instruction

The term paper is supposed to be a research paper, not a newspaper report. The difference is that the latter is only (if not mostly) purported to report facts, whereas the former should contain some analysis (of existing studies and ideally your own) and also reach a conclusion that the reader would not reach without reading the paper. Hence, to write a term paper (or any research paper), you should first come up with an interesting research question and then investigate it. For an empirical investigation, typically, the question takes the form of the effect of factor A on B. For example, what is the effect of invest bank’s reputation on the premiums of IPOs that it underwrites? What is the effect of implementation of Volcker’s rule on market liquidity? A very important requirement of academic research is focus: All the material on your paper should be relevant to the investigation that it carries out. The length of the paper should be as small as possible subject to all the points that it intends to deliver are cleared delivered.

The paper should be organized in a way that the reader can easily understand the main point(s) of the paper, typically as follows.

First, the title: It should communicate either the topic or, even better, the core message, and be catchy.

Second, the abstract: It should summarize the paper, in particular, its main findings.

Third, the introduction: It is meant to introduce to the reader what you have done. Just imagine you come across someone who asks what you have been busy with. What should you tell them? Usually, you should tell the reader (i) what your research question is; (ii) why it is interesting and worth their time to read it; (iii) how you have done your research (methodology, data, model etc.); (iv) what your main findings are; and (v) how is your work related to the existing studies that consider a similar or relevant topic. The last part leads to a “literature review”, which summarizes what the existing studies have said about the topics relevant and close to what you have considered.

Fourth, the body: Present the material step by step leading to the main points of the paper. Present ONLY that material that serves the delivery of the main points.

Fifth, the conclusion: Summarize your main findings. Write it in a way that the reader can clearly understand what can be learnt from this paper just by reading this part.

Sixth, the reference list: List all the studies you have mentioned in the paper, in an alphabetical order of the authors’ last names so that the reader can easily find any of these studies.

Sometimes, you may want to include an appendix, which should contain the non-essential material that the reader does not need to read in order to understand your analysis and main points, but should be there if they want to check something in details.

The marking standard

A term paper will be marked according to the scores on the following targets.

1. Focus. All the material on the paper should be relevant to the research question that you are investigating. If the question is about the IPO premium of Chinese firms, a history of China since 1600 is very unlikely relevant. A history of Chinse stock exchanges might partly be; then only present the part that is relevant to the IPO premium.
2. Depth. There had best been some work out of your own thinking. Put differently, the paper should not just put together a bunch of relevant studies. The depth of an academic study is way more important than the width; an excellent study is one that focuses on a particular issue or aspect of the issue and goes deep, not one that touches many issues or many aspects, but each lightly.

Depth is certainly the part of the standard that you find most difficult to score. The term paper can be a survey, that is, a detailed review of the literature. Then it will be marked according the following criteria of evaluating a literature review.

3. The coverage of the literature review. That is, how many papers, books, and other sources of material that you have covered in the review. The more, the better. The satisfactory level of coverage, of course, depends on the extent to which the topic has been studied. Coverage of 10 papers is not satisfactory if the topic has been extensively studied (e.g. IPO premium) and is satisfactory if it has not.
4. The organization of the review: A common shortcoming of a literature review is that it just gives a list of which authors has said what. It goes like: “Author A has said… Author B has found,…” It is just a list and there is no structure. If the review is organized in this way, the reader, when coming to author C, would have forgotten what author A has said. A well-organized review should give the reader a clear picture of what has been said so far about the topic. To achieve that, the key is to articulate the interrelationship between the existing studies: Who builds on whom? Who is with whom? Who is against whom? For such articulation, you need to understand the studies all well. Therefore, it is more difficult to have a decent organization of the literature than to have a satisfying coverage.

Given the difficulty of achieving depth, the marking of term papers will be mostly based on the score on (1) focus, (2) the coverage of the literature; and (3) the organization of the literature review. More specifically,

• 0 – 50 marks will be awarded to a paper that scores none of the three, i.e., that has no focus and contains a literature review with thin coverage and giving just a list of studies.
• 50 – 60 marks will be awarded to a paper that scores (1) and (2) or (1) and (3), i.e. that has focus and decent coverage of the literature; or that has focus and a well-organized review.
• 60 – 70 marks will be awarded to a paper that scores all the three.
• 70 – 100 marks will be awarded to a paper that scores all the three and goes some depth into the topic.

Suggested topics

You are welcome to choose a topic of your own interest; the following is just a suggestion of the lecturer.

Suggested topics:

1. The “epoch-making” moment. Investigate the banking history of a country that you choose. Document evidence on if and when banks of the country passed the epoch-making moment, that is, they went beyond 100% reserve bank and became a fraction-reserved bank. If they did, examine why they picked that historical moment to do so. And what was the effect of this decision on real economic activity of the country?

Reference: SelginWhite Free Banking (in Moodle).

2. Initial Public Offerings (IPO): Document the price/earning ratio of IPO of a stock market of your choice. Find out which characteristics of the issuers and the investment banks affect this P/E ratio. And which affects the IPO premium?

The References:

1. Jay Ritter, “Investment Banking and Security Issuance”, http://bear.warrington.ufl.edu/ritter/publ_papers/Investment%20Banking%20and%20Securities%20Issuance.pdf.
2. Bruno Biaisand Anne Marie Faugeron-Crouzet (2002), “IPO Auctions: English, Dutch, … French, and Internet”, Journal of Financial Intermediation, Vol 11, 1, 9-36 (focus on the Introduction).
3. Lawrence M. Benveniste and Paul A. Spindt (1989), “How investment bankers determine the offer price and allocation of new issues”, Journal of Financial Economics, 24-2, 343-361.

3. Peer-to-peer (P2P) finance: Document the performance of P2P platforms in an economy of your choice. Document any evidence that it is substituting for the main-stream banking and helps finance of the real economy.

4. The effect of the advancement of online payment systems (e.g. Zhifu Bao in China) for the interest and size of banks’ lending. Based on what you have learnt from the module, which effects do you anticipate? Are they confirmed or refuted by the data?

5. Following the methodology of Ritter (2013) and the studies referred therein, document the return of holding newly issued stocks in an economy of your choice. Compare this return to that of holding the stocks of a firm that matches the issuer in size or market-to-book ratio.

6. Investment bank hiring practices: Building a network of power through hiring is an important way for investment banks to acquire businesses. Investigate the hiring practices of investment banks in your country (or a country you pick): Whose children have been hired by which banks at what time? Is there any evidence that this hiring practice helped the bank acquire more businesses? Are there the U.S. and the U.K. laws that punish such hiring practices? How effective are these laws?

Refereces (surely you know how to use Internet to get more):

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