Empirical Methods in Accounting and Finance
Lecture 1 – Intro
What is Empirical Research?
Learning about how to do empirical research on our own – will help in next semester project.
Basics – ER (Empirical Research) and EM (Empirical Methods)
Literature review – what kind of literature to rely on and what to avoid
Data collection – you need data so what kind of data
Basic data analysis – mean – SD – descriptive analysis/statistics – kurtosis/skewnis
Regression – what is ols, time series, panel data, assumption
Writing up – writing/presenting paper, output, how to present your work
Empirical Research – to answer a question, you need some verifiable evidence, and you reach to that evidence using observation and scientific data.
It’s an outcome from detailed research which relies on verifiable evidence which is obtained using scientific data and research.
E.g., for a question like whether there is a “relation” and how they are related – positively/negatively related
Qualitative/Quantitative research can be empirical research – it relies on scientific data and observation- opposite is theoretical research which relies on words.
Why Empirical Research?
When there are counter arguments involved, we aren’t sure and agree on one thing – we need Empirical research to tell that to what extent we are right to say about a thing in a question.
You reach to reliable results using empirical research – you need large amount od data to do empirical
Does an advanced legal framework help to reduce the risk of financial crisis? – some argue that if we have advanced legal framework, it helps to reduce the risk of financial crisis but 12 years ago what happened in US the financial crisis even though US the best legal framework in world? So, we rely on empirical research.
Another example – Covid-19 – Does Covid-19 affect stock market? Some people are interested in the relationship of number of daily positive cases and daily stock prices? If you look at march graph you can say yes but If you do empirical, it doesn’t support argument – because even if positive cases everyday it doesn’t necessarily mean it affects the stock prices looking at after March graphs – After empirical research we see a positive relationship
G7 Markets – US, Japan, Germany, UK, Italy …
There is other non-financial related reason that affects stock markets such sunlight, weather, sporting event. That’s why we do Empirical research because it looks those data results too. What you think may finally be proved wrong! That’s why we do empirical research…
How they are actually executed?
Does an advanced legal framework help to reduce the risk of financial crisis?
What is advanced legal framework? Defining that
There are many legal frameworks – anti director rights, government corruption, judicial efficiency
So, first what is advanced legal framework, how would you tell it’s an advanced legal framework, you need some data/measure to determine whether it is an advanced legal framework.
So, the question is how would you define advanced legal framework, what and how many factors it incorporates to be an advanced legal framework – the second half how would you compute the risk of financial crisis? How would you define the risk? You need data for that too and then finally how would you prove that the first part reduces second part?
What is Empirical Research like?
1. Research design/outline – need to have clear idea of what is research – what is the question? Is it worth doing? No? then change it – then is it doable? Or something impossible? And can I do it? Resources? Time? Think about these
2. Empirical Parts – Collection of Data (Bloomberg terminals, Eikon, online authentic sources) how to process data, to make sure it’s usable – empirical work, data modelling run regressions – Analysis, answer the question, link to real meaning – presentation, sometimes slides
3. Writing up, Reflection, Circulation
