ACFIM0011 Dissertations (MSc F&I) Coursework Brief

Overview

• Your summative coursework represents 25% of the final mark for the unit.
• The coursework is in the form of an essay.
• Penalties will apply if the coursework is submitted late.
• The coursework is an individual piece of work – you should work on this yourself and not as a group. You will be required to make a plagiarism statement, and your submission will be tested for originality.
• The strict maximum word allowance is 2,000 words (excluding tables, figures and references). You must include a word count at the start of your essay.
• Please keep a record of the code and data that you use to generate your results.

Coursework requirement

Introduction: Your task is to write a short research paper on one of the following two topics:

• Cross-border M&As using event studies.
• Evaluating the performance of large-cap equity funds in the market of your choice.

A description of each topic is provided below. You are required to download appropriate data, do relevant calculations and present and discuss your results in a written report. Throughout the exercise, you will enhance your understanding of finance and develop your analytical and research skills.  

Structure: Your essay should have the following structure:

• Title page – your student ID number, a title, the Abstract (see below) and word count; your name should not appear anywhere in the document;
• Abstract – this is a summary of the problem considered, main results and conclusions; check abstracts in papers published in good journals for examples; it must be short – maximum 100 words; make sure you
  explicitly state your main results in the Abstract, e.g., “we find that active funds have an average alpha of 20bp per month”
• Introduction – This section will motivate and introduce your research question, give a theoretical context, briefly outline your results and place them in the context of the academic literature; aim for between 400-700 words.
• Data – this section will explain how you selected your sample, and what your data sources are; the description of your data and what you do with it should be detailed enough that the reader can reproduce your analysis; if possible, show how various restrictions affect your sample. Aim for between 150-350
  words.
• Results – in this section, you will present all your empirical results; you should carefully interpret and discuss your results and critically present how they answer your research question(s); make relevant references to the literature and compare previous findings with yours; aim for between 600-1100 words.
• Conclusions – This section will briefly summarise the report and repeat your main findings; you should also briefly comment on the limitations of your study and present how it could be extended in future research; aim for 200-300 words.
• References – This section will provide a list of sources you refer to in the text; it should be in alphabetical order by author surname, it should be complete, and there should be a 1 1 mapping between the list and
  the citations in the text.
• Table(s) and Figure(s) – in this part you will present tables and figures (if relevant) with all your empirical results; make them easy to read and understand; make sure they are all properly numbered and titled; make
  sure they are self-explanatory (the main text is not needed to interpret their content) and there is a short description (also known as caption) under each table and figure of what they present (see published papers for examples); do not use pointless decimal precision; edit your tables appropriately and do not include any ‘raw’ outputs copied directly from Stata’s output window; avoid too big tables, i.e., tables should not exceed the size of a page. To make counting words easier, I suggest you place the tables and figures after your References.

Research topic 1: Cross-border M&As using event studies

The assignment is to perform an event study similar to the one found in

Moeller and Schlingemann (2005): Global diversification and bidder gains: A comparison between cross border and domestic acquisitions, Journal of Banking and Finance, 29(3), 533-564.

Your tasks

• Collect relevant data using databases the School subscribes to (e.g. Workspace, WRDS).
• Carefully explain your sample selection procedure. You can use data from any country. If you decide to focus on US bidders, you can perform the key part of the analysis directly on the WRDS/EVENTUS platform. Non-US samples require more work, as you cannot use EVENTUS in such a case. Still, there are Stata packages that do most of the analysis for you, and supporting material will be provided.
• Provide a few summary statistics of your sample, similar to Table 1 of Moeller and Schlingemann (2005).
• Perform an event study on the subsamples of “Cross-border” M&As and “Domestic” M&As and report your results in a table similar to Table 3 Panel A of Moeller and Schlingemann (2005). Test appropriately for a “Cross-border effect”.
• Optionally, you can provide results for cross-sectional analysis, but make sure not to breach the word limit.

Research topic 2: Evaluating the performance of large cap equity funds in the market of your choice

The assignment is about understanding the performance of actively managed mutual funds and how it relates to the way risk is controlled for. This question is largely motivated by the following article:

Berk and Binsbergen (2015): Measuring skill in the mutual fund industry. Journal of Financial Economics, 118(1), 1-20.

Your task

• Select a country from which you sample funds. Ideally, this should be a country where many large market cap firms are headquartered, e.g., US, China, UK, Japan, Germany, etc..
• Select a sample of funds. Aim for at least five years of monthly frequency data and have at least 20 actively managed equity funds that invest in the large-cap firms of the given country. You can use publicly available data and/or Workspace for this.
• Collect data (the time-series of its values) on the stated benchmark index of the actively managed funds (e.g., the DAX index for Germany) and on one passive fund tracking that index. The passive fund can be an ETF depending on whether they were available on your market and during your sample period.
• Present the summary statistics of your sample.
• Provide a table similarly to the Table 6 of Berk and Binsbergen (2015). For this, you will have to estimate the performance (net alpha) of the actively managed funds using different benchmarks. In Berk and Binsbergen (2015) the two benchmarks are “Vanguard benchmark” and “FFC risk measure”. In your case, they will be “Passive fund” and “Benchmark index”.
• Test the null hypothesis that the average estimated net alphas using “Passive funds” equals the average estimated net alphas using “Benchmark index”.