Guest Lecturer: Technische Universität Chemnitz

Robert Balikrobert.balik@wmich.edu

Professor Emeritus of FinanceWestern Michigan UniversityKalamazoo, Michigan, U.S.A.

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Research Procedure My recent research papers High Frequency Trading, Macro events

Outline

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Key paper: G. Andrew Karolyi, 2011, “The Ultimate Irrelevance Proposition in Finance?, “ The Financial Review, 46, 2011, 485–512.

Related 1: Edward Leamer, E., 1983, “Let’s take the con out of econometrics,” American Economic Review, 73, 31–43.

Related 2: D. N. McCloskey, 1985, “The loss function has been mislaid: The rhetoric of significance tests,” American Economic Review Papers and Proceedings, 75, 201–205.

General: Writing Tips for Ph. D. Students, John H. Cochrane, Graduate School of Business, University of Chicago

Research Procedure, papers

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“except in the limiting case of literally zero correlation, if the sample were large enough, all the coefficients would be significantly different from everything”

McCloskey, 1985, page 202

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1. Does the paper mention the power of the tests?2. If the paper does mention the power of the test, does it do

anything about it?3. Does the paper use any type of simulations, such asMonte Carlo

or Bootstrap methods, to determine whether the coefficients are reasonable?

4. Does the paper distinguish between statistical and economic significance?

Survey Questions, 8, Karolyi

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5. If the paper does distinguish between statistical and economic significance, does it clearly quantify the magnitude of the coefficients?

6. If the paper does distinguish between statistical and economic significance and if it does quantify the magnitude of the coefficients, does it carefully interpret these coefficients?

7. Does the paper report summary or descriptive statistics for variables used in the analysis?

8. Does the paper clearly specify a null hypothesis?

Survey Questions, 8, continued

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All empirical papers published In Journal of Finance, Journal of Financial

Economics, and Review of Financial Services For years 1989, 1999, and 2009 Like survey by McCloskey, D.N. and S. Ziliak,

1996, “The standard error of regressions,” Journal of Economic Literature, 34, 97–114.

Karolyi, Survey

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All empirical papers published In Journal of Finance, Journal of Financial Economics, and

Review of Financial Services For years 1989, 1999, and 2009 457 papers Update of survey in

Karolyi, Survey

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1. Does the paper mention the power of the tests? 13.3%, 4.4%2. If the paper does mention the power of the test, does it do

anything about it? 9.0%, 16.7%3. Does the paper use any type of simulations, such asMonte Carlo

or Bootstrap methods, to determine whether the coefficients are reasonable? 21.9%, 13.2%

4. Does the paper distinguish between statistical and economic significance? 88.0%, 80.2%

Survey Questions, 8, Responses

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5. If the paper does distinguish between statistical and economic significance, does it clearly quantify the magnitude of the coefficients? 56.7%, 66.5%

6. If the paper does distinguish between statistical and economic significance and if it does quantify the magnitude of the coefficients, does it carefully interpret these coefficients? 55.1%, 44.5%

7. Does the paper report summary or descriptive statistics for variables used in the analysis? 89.1%, 32.4%

8. Does the paper clearly specify a null hypothesis? 86.4%, 97.3%

Survey Questions, 8, continued

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John Cochrane, Writing Tips for Ph. D. Students, pdf file, web address: http://faculty.chicagobooth.edu/john.cochrane/research/Papers/phd_paper_writing.pdf

Greg Mankiw blog, How to write well, web address: http://gregmankiw.blogspot.de/2006/10/how-to-write-well.html

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Links

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McCloskey, writing, book, Economical Writing, 2nd Edition, 1999, Waveland Press, Inc.

R. Carter Hill, Professor Econometrics and Economics, Louisiana State University, web address: http://www.bus.lsu.edu/hill/writing_economics_papers.htm

Links, continued

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Example

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Example, continued

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Another Example

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