RESEARCH METHODS

BST153
Coursework 2 Detailed Advice
Dr. Woon Sau Leung
Lecturer in Finance
LeungWS1@cardiff.ac.uk
Office Hr: Tues (2-4pm)
B04 Aberconway Building

Marking criteria:
You demonstrate the ability to conduct an empirical analysis in the
context of accounting and finance.
Reasonable structure and proper referencing styles.

You are able to use Eviews to perform data analysis and estimate
regressions.
You understand the theory behind the empirical tests and can
explain how the empirical analysis is testing the theory.
You are able to explain the findings in relation to the hypothesis
and the theory in detail and intuitively.
You are able to present the analysis and the results in an effective,
concise and neat way.

This coursework has two parts:

50%:
Testing the CAPM using time series regressions
50%:
Testing the determinants of audit fees in the UK

Make sure you cover both parts equally. So, plan carefully and
use wisely the space and words as you have 2500 word limit
(again, it is +/-10%).

For both parts:

The requirements:

Explain the theories and models being tested.

State clearly and explain the null and alternative hypotheses.
Explain and summarise briefly your data,
e.g. what industry portfolio you are using, how many months, means, median, stdev, etc.

Estimate regressions and present the findings

create your own tables, do not use screenshots for tables).

Interpret the findings in relation to the hypotheses and the theories.

Analysis of diagnostic tests to evaluate goodness of fit of your regressions.
Analysis of residuals to explain the possible bias and demonstrate how
these potential bias may be corrected.
Compare the results briefly before and after the adjustment.

Any other data, tests, or information that you feel are interesting and relevant
to the empirical tests.

Tips on writing (1)

The key is to make sure the readers can understand and
follow your arguments.
Plan the essay structure carefully and logically.
Read academic journals and pay attention to how authors write
their introductions, empirical section and conclusions.

Try to learn from academic papers the way they explain their
findings, i.e. in their empirical findings section.

Tips on writing (2) - Signposting

Always put signposts throughout the essays, so that the readers can
easily follow your logical flow.
Examples of major signposts:
The aim of this study is to .
The purpose of this thesis is to.
This essay argues that .
The main questions addressed in this paper are .
This essay critically examines.
The above discussion raises some interesting questions.
This paper begins by . It will then go on to . Finally, .
This chapter reviews the literature .
In conclusion, .
In the following section, I shall explain the
(Source: http://www.ncl.ac.uk/students/wdc/learning/language/signposting.htm)

Tips on writing (3) - Signposting

Listing:
first(ly), / second(ly), / finally, /
Indicating addition or similarity:
also, / besides, / in addition, / furthermore, / as well /
similarly,
Indicating contrast:
however, / nevertheless, / on the other hand, /
Giving a reason:
for this reason, / because / because of / due to
Indicating result or consequence:
therefore, / thus, / as a result, / consequently,
Reformulating an idea:
in other words, / to put it simply, / that is ...
Exemplifying:
for example, / for instance, / to exemplify,
(Source: http://www.ncl.ac.uk/students/wdc/learning/language/signposting.htm)

Tips on writing (4) Various ways to cite

Examples:

As pointed out by Longstaff (2010),

Following prior literature, the banks fundamental variables we consider include those
relating to banks earnings (Basu, 1983; Cooper et al., 2003), non-interest income (Cooper
et al., 2003; Bessler et al., 2007), loan portfolio credit quality (Thakor, 1987; Wahlen, 1994;
Meeker and Gray, 1997; Jones et al., 2013), exposure to funding illiquidity risks
(Fahlenbrach et al., 2012; Acharya et al., 2013), equity risks (Anderson and Fraser, 2000;
Ang et al., 2006, 2009), turnover ratios (Chordia et al., 2001) and size (Banz, 1981; Gandhi
and Lustig, 2011).

Fama and French (1992) find empirical evidence that

Jones et al. (2013) document significant positive relation between

On the theoretical side, a number of studies focus on while the linkage between and
has not yet been established.

Many more.

Presentation style and format

While there is no strict requirement of a presentation style and
format, a good starting point refers to: 12pt, times new roman, and
justified text.
The key is to report the findings in an effective, efficient and neat
manner.
My advice is to follow academic journal conventions, e.g. table
format, structure of the analysis, the writing style in presenting the
results.
I will show you various examples of presentation styles with
reference to academic papers.

Format and content of tables for this coursework

You have to create your own table, instead of copying and
pasting the Eviews table to the word document.
Insert the created tables in the main text.

Eviews regression output gives a number of statistics, only

report those that are relevant to the hypothesis testing and the
empirical analysis. You have to decide what to include and
how to organise the table.
As the space is limited (2500 words), you should try to present
the tables in an effective and concise way.

Examples of regression tables (1)

Borrowed from Baek et al. (2004)

You can have different model specifications in different columns.

The ***, ** and * superscripts denote statistical significance at 1%, 5%, and 10% respectively.
You need to report the coefficient values. The t-statistics or the p-values are reported in () or []
under each coefficient.

Examples of regression tables (2) Borrowed from Cooper et al. (2003)

The t-statistics are reported in () under each coefficient.

Regressions using different dependent variables are reported in different columns.
The variables are on the first columns, and the coefficients are reported.
Focus on how academic research tend to format their tables and how the table are
named: Table 4 with a title that explains what this table is about.

Examples of tables in papers (3)

Borrowed from Galema et al. (2008)

The t-statistics are reported in

new columns.

We can use Panels to report

different sets of results.

Two regressions are reported

for each panel in the column
(1) and (2).

You can think about including

the R-squared, F-statistics,
maybe some tests of residuals
at the bottom of the table too?

Hints for getting higher marks

So far, if you do your coursework according to the marking criteria,
you should be able to pass without major problems. If you want to
get distinction or higher marks, here are some additional tips.
Any other data, tests or information that you feel are relevant to the
empirical tests.

Additional tests of residuals? And why?

Additional tests of some related theories?
Extra analysis using different data?
What else can you do with Eviews?

I shall introduce a few topics relevant to empirical finance for you to

consider in the next lecture.