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Title: Advice for finance doctoral students


1
Advice for finance doctoral students
  • Professor Matti Keloharju
  • Helsinki School of Economics
  • This presentation reflects my personal opinions
    on finance research. It does not necessarily
    reflect the policy of the Helsinki School of
    Economics or GSFFA.

2
Contents
  • Goal of doctoral education
  • Coursework
  • Licentiate thesis or not?
  • How to structure a dissertation?
  • U.S. style dissertation design
  • How to choose research topics?
  • What kind of finance research is published in the
    major journals?
  • Different research strategies for a major
    publication
  • Why is it difficult to publish papers in major
    journals using Finnish data?
  • Key relative advantage for doctoral students over
    professors
  • Types of research opportunities in Finnish
    finance research
  • Where to search for information?

3
Contents
  • Writing a paper
  • Where can you get comments?
  • Conferences
  • Why go to conferences?
  • Which conferences to go to?
  • Referee process
  • How do you resubmit a paper?
  • How long does it take to publish a paper?
  • Journals
  • Which journals should you follow?
  • Journal subscriptions
  • International experience
  • U.S. academic finance job market

4
Goal of doctoral education
  • Although most students have other career goals,
    the goal of doctoral education is to train
    students to become researchers.
  • A doctorate does not yet make you a mature
    researcher. Rather it is a license to do research
    on your own.

5
Coursework
  • Coursework is not only obligatory but also useful
    in identifying research topics. Therefore, and
    because it may be difficult to do good research
    until one has grasped all the fundamentals, it is
    often not advisable to hurry with thesis topic
    selection.
  • Particularly students with ambitions for staying
    in the academic career are encouraged to
    strengthen their analytical and finance skills
    with additional methods and finance courses, and
    by acquiring fluency at least in one programming
    language.

6
Licentiate thesis or not?
  • Pros
  • If the study is not good enough to be a doctoral
    dissertation, it may be good enough to be a
    licentiate thesis
  • Salary increase and merit in certain academic jobs
  • Cons
  • Involves significant fixed costs / often
    inefficient use of time and effort
  • Licentiate degree relatively unknown outside of
    Finland

7
How to structure a dissertation?
  • Monograph
  • Difficult to get comments because
  • No one wants to read over 30 pages
  • Difficult to present in a seminar
  • Requires additional work in rewriting the papers
    into article format for journal submission
  • Greater focus means smaller fixed costs
  • Greater effort in one project may make project
    management more difficult
  • Collection of essays
  • Easier to get comments from others
  • Papers are readily in journal format
  • Greater fixed costs in becoming familiar with
    several topics
  • You learn more if you become familiar with
    several topics
  • May be difficult to find a sufficiently narrow
    topic that captures the essence of all essays
  • Easier to divide research effort into manageable
    projects

8
U.S. style dissertation design
  • Three essays of which one is really good (truly
    novel with good results)
  • The two other essays also need to be solid work
    but not of similar quality as the lead essay
  • The total impact of one really good and two
    mediocre essays is usually greater than that of
    three good essays.
  • (Not often applied in Finland the dissertation
    includes both theoretical and empirical analyses.)

9
How to choose research topics?
  • Krishna Palepu (HBS) 75 of contribution of the
    paper has been fixed once you fix the topic
  • Be VERY careful in determining the topic
  • More experienced researchers can often very
    easily judge whether a research topic has
    potential or not
  • There are significant fixed costs involved in
    every research project, yet the credit from top
    quality research can be (should be) very much
    higher than from mediocre or low quality research
    gt It may make more sense to do fewer superb
    research projects than more mediocre research
    projects!

10
How to choose research topics?
  • The topic should be of interest to other
    researchers and, preferably, also to
    practitioners.
  • However, it may not be optimal to choose your
    topic based on your current job or current
    interests
  • Most topics are not suitable for a PhD
    dissertation
  • The time you are likely to spend for preparing
    your dissertation is much longer than the time
    you are likely to spend in your current job.
  • Some research areas mature very fast. Students
    who cannot work on a full time basis on the
    dissertation should avoid such topics (or, at the
    very least, base their dissertation on essays so
    that they can focus on a sufficiently narrow
    project).
  • The dissertation often forms the basis for the
    publication record. For students with ambitions
    for an academic career, it is thus very important
    to carefully assess the publishability of the
    dissertation work before fixing the topic.

11
What kind of finance research is published in the
major journals?
  • Theoretical research analytical models
  • Empirical research
  • Rarely research design / simulation studies
  • Rarely case studies (in practice, JFE only)
  • Rarely experimental work
  • Almost never questionnaires
  • Almost never conceptual studies (JFE only)

12
Different research strategies for a major
publication
  • Use of Finnish data
  • Identify hypotheses which
  • Are of interest to U.S. researchers
  • Cannot be tested with U.S. data
  • Can be tested with sufficient Finnish data
  • Note that these criteria often lead to a niche
    strategy
  • Use of U.S. data
  • Very competitive
  • Use of data from several countries
  • Very competitive, used to be less competitive
    than use of U.S. data
  • Theoretical research
  • Problem lack of theoretical finance research /
    advice in Finland

13
Why is it difficult to publish papers in major
journals using Finnish data?
  • Tundra bias
  • Often very small samples by international
    standards
  • Remember that it is difficult to publish in major
    journals using any data

14
Key relative advantage for doctoral students over
professors
  • Time gt Doctoral students may afford to take
    meaningful but very work intensive projects that
    professors (unless equipped with the necessary
    research assistance) would never take

15
Types of research opportunities in Finnish
finance research
  • Non-canned data more easily available than in the
    U.S.
  • Legal liabilities small sensitive data better
    available
  • Small country everybody knows everybody
  • Very large market shares data from one source
    may give a good idea of the entire market
  • Executives respond surprisingly positively to
    data requests and well structured surveys.
    Example Mervi Niskanens dissertation. The flood
    of research in the last few years has probably
    decreased this willingness, however.
  • Interesting institutional features, e.g.
  • Allocation patterns in equity offers public
    information
  • Brokerage codes publicly available in stock
    market transactions (market microstructure
    research)

16
Types of research opportunities in Finnish
finance research
  • Changes in institutional setting, e.g.
  • Change in corporate governance culture / banks
    decreasing role / foreign investors increasing
    role
  • Change in regime from rights offers to
    book-building offers
  • Evaporation of voting premiums
  • Tax reform
  • Nokia interesting as such!
  • Identify interesting and untested hypotheses that
    can be quantitatively tested within Nokia.

17
Where to search for information?
  • Published papers in most journals can be
    relatively easily retrieved from databases
  • Check references of published studies
  • Identify first a key paper in the literature.
    Then use ISI Web of Knowledge to list all papers
    that cite this paper.
  • Finance Literature Index (by Jean Heck,
    McGraw-Hill)
  • Working papers are often most important. Apart
    from using a search engine, they can be found
    from
  • SSRN.com
  • Conferences web sites
  • Universities and NBER (National Bureau for
    Economic Research) working paper series
  • Individual researchers web sites

18
Writing a paper
  • Introduction is the most important, yet often
    most ignored part of the paper. Most researchers
    only read the introduction (if even that).
  • Remember that a good introduction should include
    a very good motivation for the paper (Why is the
    paper important? How does it contribute to the
    literature?) and essentially a full description
    of the main results and conclusions. Example
    Rajan et al, JF, February 2000.
  • Particularly in corporate finance studies, a
    quote from a prestigious business magazine (e.g.
    Business Week, Economist, Euromoney) can be a
    very useful motivational tool. Example Torstila,
    2001.

19
Writing a paper
  • Remember that the clarity of your writing has a
    very important impact on how others (including
    the referee, particularly in major journals) view
    your paper. Good research results do not speak
    for themselves they need to be spelled out!

20
Where can you get comments?
  • Own advisor(s)
  • It is very important to have an advisor who (1)
    knows the research subject (2) is interested
    in/committed to the advisory work on a regular
    basis (3) shares the same paradigm.
  • Colleagues
  • Remember reciprocity!
  • Seminars
  • MUCH more important than conferences because
    there is much more time per presentation and
    audience is focused on just one paper
  • When you are a more senior researcher or on the
    job market, you may get seminar invitations from
    abroad

21
Where can you get comments?
  • (Other researchers interested in the same
    subject)
  • Often difficult to persuade foreigners to give
    comments. Demonstrated ability to do good work
    and reciprocity may help.
  • Dont ask the same person to comment on the same
    work twice unless the person explicitly asks for
    that!
  • The Foundation for the Advancement of Finnish
    Securities Markets provides grants for advisors
    that come outside of the home university.
  • (Conferences)
  • (Tutorials)

22
Why go to conferences?
  • Meet other people
  • Make yourself known (respect, references,
    refereeing etc.)
  • Potential data sources
  • Potential co-authors
  • Useful contacts for later administrative purposes
  • Get new ideas (most papers are available on the
    web)
  • Get comments on own research (rarely good
    comments)
  • Get a job (AFA)

23
Which conferences to go to?
  • American Finance Association
  • Huge conference in early January in some large
    U.S. city
  • Part of Allied Social Science Association at the
    same time in the same place conference for
    American Economic Association, Econometric
    Society etc.
  • Affordable but luxurious conference hotels,
    nominal conference fee
  • Excellent paper quality gt very difficult to get
    your own paper into program (deadline for papers
    in March on previous year)
  • Lots of interesting sessions in other
    simultaneous conferences as well
  • Huge job market for graduating PhDs for North
    American and some European Schools
  • Everybody is there, but everybody is
    interviewing job market candidates so you dont
    meet them

24
Which conferences to go to?
  • Western Finance Association
  • Small finance-only conference in late June in
    some idyllic city in Western U.S.
  • Everybody is there, and you actually see them
    because there is no ongoing job market
  • Excellent paper quality
  • Very difficult to get your own paper into program
    -- but perhaps somewhat easier than in AFA
    because the refereeing process is blinder
  • Deadline for papers in November on previous year
  • Often expensive and luxurious conference hotels,
    nominal conference fee

25
Which conferences to go to?
  • European Finance Association
  • Financial Management Association
  • European Financial Management Association
  • Conferences on special issues
  • Worth considering, but paper quality is typically
    much lower than in AFA and WFA. However, own
    chances in getting the paper in the program is
    much greater (and it is good practice for more
    demanding audiences).
  • May have high conference fees gt Less bang for
    buck!
  • If you want to socialize with Europeans, go to a
    European conference.

26
Referee process
  • When you submit your paper to a refereed journal,
    it will go to the editor. The editor will ask for
    opinion from one or more referees. Referees are
    (in prestigious journals) typically researchers
    who work in the same area (and in less
    prestigious journals they may be almost
    anything). The editor will make the publication
    decision based on the referee reports and his own
    assessment.
  • Many, if not most, referee comments are stupid
    (and some are utterly stupid). The level of
    stupidity is inversely related to the quality of
    the journal and the clarity of your writing.
  • Even if your paper has been rejected on stupid
    grounds, dont complain about your treatment to
    the editor!

27
Referee process
  • The referee has much less time to become familiar
    with your paper than what you have had during the
    research process. Although the referee is likely
    to be more interested in the topic than the
    average finance scholar (because of self
    selection in specialization), he/she is likely
    to be much less excited about your paper than
    what you are.
  • Incentive problem in most journals, particularly
    in good journals, it is a smaller reputational
    risk to reject a good paper than to accept a bad
    paper. Moreover, it often takes much less time to
    write a report that identifies a few reasons why
    the paper should be rejected than by writing a
    report that tells in sufficient detail what the
    author needs to do to improve the paper for the
    next round (and, perhaps, in subsequent rounds)
    gt The referee has an incentive to reject your
    paper.

28
Referee process
  • The referee may make the rejection decision on
    different grounds than what is written in the
    referee report. For example, after having read
    the introduction, the referee may simply think
    that your paper is boring, or that you are sloppy
    (grammatical errors or otherwise sloppy writing)
    and then quickly find a few excuses based on what
    the paper can be rejected.
  • A paper is almost never accepted to a journal as
    such because
  • Most papers are not that good
  • The referee wants to signal to the editor that
    he/she has read the paper and can contribute

29
How do you resubmit a paper?
  • If the editor asks you to resubmit a paper, and
    you choose to do so, remember to write a polite
    reply letter to the editor and the referee(s)
    which detail (comment by comment) how you
    addressed their criticism.
  • It is advisable to apply this practice also to
    the pre-examination process.

30
How long does it take to publish a paper?
  • Prepare yourself that it will take on average
    five years from the start of the project until
    you see your paper published.
  • In addition to doing the research, the
    following takes time
  • Obtaining comments from other researchers
  • Obtaining editorial feedback
  • Revising the paper according to editorial
    feedback
  • You may have to try several journals until the
    paper is accepted
  • You may have to refocus the paper because of
    competition that pops up during the research
    process
  • Publication lag after the acceptance of the paper

31
Which journals should you follow?
  • Journal of Finance (JF, AFA association journal)
  • Very broad journal, and also the best
  • Includes both technical and less technical papers
  • Very fast journal (on average about 2 months)
  • Journal of Financial Economics (JFE)
  • Publishes all kinds of papers but has a clear
    bias towards empirical corporate finance papers
  • Publishes also clinical papers
  • The fastest journal (editorial decision in less
    than 2 months)
  • The least technical major finance journal
  • Requires editorial assistant with superb command
    of English language

32
Which journals should you follow?
  • Review of Financial Studies (RFS, WFA association
    journal)
  • Publishes all kinds of papers but has a clear
    bias towards theoretical and asset pricing papers
  • The most technical major finance journal
  • Slower than JFE and JF
  • Journal of Financial and Quantitative Analysis
    (JFQA)
  • Not quite as prestigious as JF, JFE, and RFS, but
    improving
  • Focus perhaps somewhere between JF and RFS
  • Slower than JFE and JF
  • Journal of Business (JB)
  • Relatively prestigious journal with mostly
    finance focus
  • Terrible publication lag newly admitted articles
    are unlikely to be published until 2008

33
Which journals should you follow?
  • Top economics journals
  • Journal of Political Economy, Econometrica,
    American Economic Review, Quarterly Journal of
    Economics
  • Top accounting journals
  • Journal of Accounting Research, Journal of
    Accounting and Economics, Accounting Review
  • Good but less prestigious finance journals from
    your own field
  • E.g. Journal of Empirical Finance, Journal of
    Corporate Finance, Financial Management, Journal
    of Financial Markets, Journal of Futures Markets
  • Practice oriented journals
  • Journal of Applied Corporate Finance, Financial
    Analysts Journal, Journal of Portfolio Management
  • Practitioner magazines
  • Business Week, Economist, Euromoney,
    Institutional Investor

34
Journal subscriptions
  • If you plan an academic career in Finance, it may
    make sense to make a personal subscription (cheap
    for students) of some of the major journals.
  • Subscribe to Social Science Research Network
    (SSRN.com) electronic journals of your choice.
  • Check also their web site frequently to look for
    additional interesting papers

35
International experience
  • If possible, try to get into some prestigious
    university as a visiting student/visiting scholar
  • While this may not necessarily directly help you
    in your research (a half a year or full year
    visit may not be sufficient to make the necessary
    connections, and you may not be treated as well
    as regular PhD students), a visit will surely
    shape your view of how research should be done
    and help you in the idea generating process.

36
U.S. academic finance job market
  • Caveat very difficult (but not impossible) to
    get a job without a degree from a prestigious
    school / similar program
  • The most important market is the rookie market
    for PhD candidates in the academic year they are
    about to get their degree
  • Send applications by about late November
  • Interviews, if any, at AFA in early January
  • Best candidates from interviews invited to campus
    visit (costs paid)
  • Best candidate(s) on campus, if any, given an
    offer in March
  • Work starts in July/August
  • Salary for newly minted finance assistant
    professors at top schools about 180,000

37
Further useful advice
  • Check out How to get ahead in graduate school
    without actually cheating, and the related links
    in the web page, at
  • http//www.cob.ohio-state.edu/fin/phdadv.htm
  • Check out How to publish in top journals, at
    http//www.ag.iastate.edu/journals/rie/how.htm
  • Hamermesh, David, 1992, A young economists guide
    to professional etiquette, Journal of Economic
    Perspectives, Winter 1992.
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