FinancialMarkets(JEM037)

5October2010

Lecture1
Introduction
1.1CourseOutline O l

JiriNovak
IES,UK

Lecturer
Background borninZlin,livedinOstrava livedinUppsala,Swedenfor7years Education UppsalaUniversity,Uppsala(Ph.D.in2008) WarwickBusinessSchool,Coventry ColumbiaUniversity,NewYork AcademicPosition AssistantProfessoratCharlesUniversity,Prague McKinsey&Co.CorporateChair
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ResearchInterest
ResearchArea empiricalcapitalmarketbasedfinancial accountingresearch ResearchPapers p Hamberg,Novak(2010) Accountingconservatismandtransitoryearnings invalueandgrowthstrategies, JournalofBusinessFinanceandAccounting Hamberg,Novak,Paananen(2010) TheAdoptionofIFRS3:TheEffectsof ManagerialDiscretion&StockMarketReactions, EuropeanAccountingReview

Teaching
Courses FinancialAccounting(B.A.,fall) FinancialManagement(B.A.,spring) TheoryofFinancialMarkets(M.A.,fall) y ( ) CompanyValuation(M.A.,spring) MastersTheses writteninEnglish ambitiontoyieldadecentlocalpublicationafter refinementsfollowingfinalsubmission send2pageproposal,incl.min.5references
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Interests
AcademicDebate secondaryschoolanduniversitydebateclubs (www.dkuk.wz.cz) Arts moderntheatre worldmusic Sports badminton swimming

JiriNovak,IESUK

FinancialMarkets(JEM037)

5October2010

Contact
JiriNovak Office: 402 Phone: +420222112314 Email: novakji@fsv.cuni.cz j Web: ies.fsv.cuni.cz/en/staff/novakji Available:Monday,3:00p.m. 5:00p.m. AdamGersl Phone: +420224412062 Email: adam.gersl@cnb.cz Available:byappointment
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Contact
KrenarAvdulaj Email: ies.avdulaj@gmail.com Available:byappointment Ivona Hrusova IvonaHrusova Email: ivona.hrusova@seznam.cz Available:byappointment MilanRippel Email: milanrippel@seznam.cz Available:byappointment

Announcement
InvestmentResearchChallenge CzechCertifiedFinancialAnalystsSociety oneteamof35studentsperuniversity analyzeareallifecase;prepareanequityreport y p p q y p aboutacompanyandpresentittoapanelof evaluatorsfromCzechbusinesses eachteamisassignedamentor,CFAcharter holder,withanextensiveexperience winnersproceedtoregionalroundinMadrid, SpainandglobalroundinOmaha,Nebraska

Objectives
CourseObjectives provideoverviewofcontemporaryfinancial marketsresearch provideopportunityforindepthanalysisofkey prominentresearchpapers allowstudentstostudythoroughlyachosen subfieldandpreparetheirownthesisproposal PriorKnowledge basicknowledgeoffinanceisusefulbutnot required
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Objectives
Motivation thecourseundergoesatransitionandrefocusing towardsatopicbasedM.A.course wehaveeliminatedthecompanyvaluation projectastherewillbeaspecializedcoursein companyvaluationsincethespringterm2010 theproposalshouldgiveyouanopportunityto: divedeeperintoaselectedtopicandreflect uponit practicethesisworkthatshouldbeauseful exercisebeforewritingforyourMastersThesis
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Literature
Readings academicpapersassignedasreadingsfor individuallecturesandseminars studentsarerequiredtostudytheassigned readingsinadvance(finalexam,penaltypoints) di i d (fi l lt i t ) detaileddiscussionofreadingsatseminars

JiriNovak,IESUK

FinancialMarkets(JEM037)

5October2010

Requirements
ThesisProposal teamsof3studentsprepareathesisproposal presentinganinnovativeresearchideathatis wellrootedinexistingresearch i l di including:introduction,literaturereview, i d i li i hypotheses,outlineofmethodology,min15 relevantreferences max10pages(fontsize12;1.5spacing, excludingtitlepageandlistofreferences) gradedby0 30points(min10ptstopass) deadline:November30,2010, 2points/day
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Requirements
Presentation infinaltwoweekseachteamwillpresenttheir proposaltoTAsandfellowstudents usePowerPoint,allteammembersshould participateinpresentingtheproposal i i i i h l pointsgivenforwellfocused(readthread), wellstructuredpresentationthatclearly presentstheresearchideaandmotivateswhyit isinnovativeandinteresting max8minutes gradedby0 20points

Requirements
OppositionReport eachteamwilldeliveranoppositionreportof someotherthesisproposal,includingan analysisandagradingsuggestion(0 30pts) pointsgivenforindepth,insightfulanalysis i i f i d h i i hf l l i (innovativeness?,interest?,feasibility?, problems?),wellstructureddiscussionof researchproposal max2pages(fontsize12;1.5spacing) gradedby0 10points deadline:December7,2010
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Requirements
Exam individual,closedbook 10 20multiplechoice,oryes/noquestions 3 4openquestions(1pageperquestion) requiringananalysisofsomespecificaspectin oneofthediscussedresearchareas gradedby0 40points(min20ptstopass)

Grading
PassingCutoffs
thesisproposal presentation opposition finalexam final exam total bonus/penaltypoints 30pts 20pts 10pts 40pts 40 pts 100pts +/ 10pts min55pts

Grading
FinalGrades A 1 excellent 85 B 2 verygood 70 C 3 good g 55 F N fail bonuspointswillbeaddedtotheoverallscore todeterminethefinalgrade

Bonus,Penalty bonus activeparticipationinlecturesand seminardiscussions(qualitymatters) penalty lackofknowledgeofassignedreadings

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JiriNovak,IESUK

FinancialMarkets(JEM037)

5October2010

Schedule
Date 5October 12October 19October 26October 2November 9November 16November 23November 30November 15:30 - 16:50 Introduction, Course Requirements Lecture: Behavioral Finance Guest Lecture: IPOs - practical experience Lecture: Market Liquidity Money Markets and Central B k M M k t d C t l Bank Auctions Cross-Border Capital Flows, Contagion and Risk Aversion Structured Products and Global Financial Crisis Who Novk Novk Mejstk Gerl Gerl Gerl Gerl 17:00 - 18:20 Lecture: Efficient markets Lecture: IPOs Tutorial to: Efficient Markets and Behavioral Finance Tutorial to: IPOs Tutorial to: Market Liquidity Tutorial to: Money Markets and Central Bank Auctions Tutorial to: Cross-Border Capital Flows, Contagion and Risk Aversion Who Novk Novk TAs TAs TAs TAs TAs TAs TAs TAs TAs TAs

1.2ThesisWriting h

7December 14December 21December

Value Relevance of Accounting Tutorial to: Structured Products and Novk Information Global Financial Crisis Tutorial to: Value Relevance of Value Relevance of Earnings and Novk Accounting Information Cash Flows, Accrual Anomaly Guest Lecture: Trading Strategies Tutorial to: Value Relevance of Schimek and Systems - Practical Example of Earnings and Cash Flows, Accrual (CNB) the CNB FX reserves management Anomaly Presentations by Course Participants Presentations by Course Participants TAs TAs Presentations by Course Participants Presentations by Course Participants

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Thesis
Structure introduction outliningandmotivatingyourtopicsettingit withinthecontext(1 2pages) lit t literaturereview i overviewoftheexistingliteraturebasedonat least10academicreferences(3 4pages) hypotheses explicitspecificationandmotivationbasedon theexistingliterature(1 2pages) outlineofmethodology briefoutlineofmethodsandvariables(2 3pgs)
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Thesis
Objective youshoulddemonstrateyourcapabilitiesto (fairly)independentlycompleteallphasesofa complexproject incontrasttotheBachelorsThesisyour MastersThesisshouldputmoreemphasison theindependentanalysis(contribution)

Process
Whatdowewanttoinvestigate? Idea Whatdowealreadyknow? LiteratureReview Hypotheses

Contents
Introduction LiteratureReview ResearchDesign researchidea,motivatedandsetintothe contextofexistingliterature/knowledge structuredpresentationofexistingliterature leadingtotheformulationofhypotheses leading to the formulation of hypotheses motivatingthechoiceofmethodologyand specifyingthedatasampleselection discussingthemajorfindingspresentedin tablesandrelatingthemtohypotheses interpretationofthefindingshighlighting theirimplications

Howtotestit? Methodology,DataSample Doit! Results,Conclusions ThesisProposal

Results Conclusion

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JiriNovak,IESUK

FinancialMarkets(JEM037)

5October2010

Idea
Specific beasspecificaspossible,delimityouridea,go deepnobroad,ideallyayes/noquestion Feasible youmustbeabletoexamineit(veryimportant!) Interesting yourideashouldberelevant(itshouldmatter) original(notalreadyexaminedbysomeoneelse)
agoodresearchideaishalfofthesuccess!
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Idea
HowtoGetIt? skimthroughbusinesspressforcurrentand controversialissues readthroughthepapersrecommendedforthe coursefocusingontopicsyoufoundinteresting gothroughadditionalresearchpapers publishedinacademicjournalsoronSSRN brainstormwithyourfriends
ifIonlyknew!

Idea
Tips associationstudies examineanexpected relationshipbetween2factors, e.g.boardindependence firmperformance eventstudies analyzemarketreactionfor somekindofevent,e.g.CEOleavingthe company,companyissuingexecutivestock options,announcementsofcompliancewith ethicalstandards,etc. replicationswithatwist extendexisting methodologyandtestinonotherdata hotissues IFRSadoption,marketbubbles
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Idea

LiteratureReview
Purpose compareandcontrastthefindingsofdifferent studies,letthereferencescommunicate literaturereviewshouldgiveapictureofthe currentstateofknowledgeofthetopic,i.e. concludeitwithasynthesisofwhatweknow youshouldexplainhowyourstudyfitsinto thepicture,i.e.howitbuildsupanextends whatwealreadyknow motivationofyourhypothesesshouldbebased ontheexistingliterature
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LiteratureReview
GoogleScholar scholar.google.com advancedsearch SocialScienceResearchNetwork www.ssrn.com freelyaccessibledatabaseoffreshworking papersinprocessofpreparationforpublication VirtualLibrary recommendeddatabases:BusinessSource Premier,ScienceDirectElsevier,JSTOR journals:JournalofEconomicPerspectives(), JournalofAppliedCorporateFinance

JiriNovak,IESUK

FinancialMarkets(JEM037)

5October2010

LiteratureReview
ReadingTips readtheabstracttofindifthepaperisrelevant readtheintroduction,gothroughallthetables andfigurestoseewhatinformationitcontains readthefirstsentenceofeachparagraphtoget anoverviewofthepaper Notes keeptrackofthereferencesyouuse,makeshort notesnottogetoverwhelmedbythepapers Zotero (Firefoxplugin)isagreatsoftwareto keeptrackofyourreferences
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Hypotheses
Motivation hypothesesshouldbebasedontheliterature youhavereviewed(deductiveapproach) thereshouldbeareasontoexpectwhatyou proposeinyourhypotheses Testability itisabsolutelycrucialthatyourhypothesesare testable,i.e.theymustbesimpleyesorno statementsthatcanberefuted(orconfirmed)by theempiricalevidence

Methodology
MethodsUsed thereisamyriadofresearchmethods;your selectionshouldbesuitablefortheproblemat hand,i.e.fortestingyourhypotheses bereasonablyspecificindescribinghowyou selectyourvariables,howyoudefinethemand whatstatisticalmethodsyouuse readthemethodologysectioninsimilar researchpaperstogetinspiration

Introduction
Function introductionshouldmakethereaderreadthe restofthepaper Contents context(whatisthecurrentstateofdiscourse), motivation(whyisitinteresting)positioningit withinthecontextofexistingresearch overviewofkeyresultsandadiscussionoftheir implicationsandimportance disposition(contentsofindividualchapters)
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Formalities
References useonestyleinthewholepaper Zotero canhelpyougreatlywithformatting includealistofreferencesattheend Footnotes donotusetoomanyfootnotes trytoeitherincorporatetheideainthemajor bodyoftextorscrapit

DoNotGiveUp!

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JiriNovak,IESUK

FinancialMarkets(JEM037)

5October2010

DataSample
QuantitativeStudies ifyouusedatabasedata,specify,howyou selectedyoursample(timeperiod,selectionof companies) DescriptiveStatisticsshouldgivethereader anoverviewofthedatayouuse,typicallythey arereportedinTable1ofthepaper QualitativeStudies specifyhowyouselectedthetargetfirmsyou aregoingtoobserve describetheirbackground
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Extra
CompletingtheThesis

DataSample
Databases ThomsonDatastream accountingandcapital marketdataforallmajorcompaniesinthe world,userfriendlyinterface Edgar accountingdataforcompaniesUSlisted IESDatabases http://ies.fsv.cuni.cz/cs/node/158 ReutersWealthManager Magnus

Results
QuantitativeStudies allimportantresultsshouldbepresentedin tablesandfiguresthatmustbeproperlylabeled (tellingtabledescriptionsareimportant) highlightandcommentonthemostinteresting resultsinthetext makesureyourresultsprovideananswerto yourhypotheses! distinguishclearlybetweenwhatcan objectivelybesaidbasedonthedataandwhat isyoursubjectiveinterpretation
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Results
QualitativeStudies presentyourresultsinaclear,understandable way(possiblyaccompaniedwithfigures) presentthemostimportantfindingsfirst (youdonotwriteadetectivestory) ( d t it d t ti t ) thereshouldbeaclearlinkbetweenyour resultsandyourhypotheses discussvalidityandreliability;triangulateyour findings,discusslikelybiases distinguishclearlybetweenwhatthedata objectivelyshowandhowyouinterpretit (i.e.whatyouthinkitmeans)
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Conclusion
Interpretations,Implications whileresultsshoulddiscusstheparticular findingsyoupresent,inconclusionyoushould adoptabroaderperspective(birdseyeview) conclusionshouldincludeyourinterpretation oftheresults,theirimplicationsforpracticeand yoursuggestionsforfurtherresearch conclusionshouldbelinkedtotheintroduction andresultsshouldbelinkedtohypotheses

JiriNovak,IESUK

FinancialMarkets(JEM037)

5October2010

Abstract
Timing eventhoughabstractcomesfirstinthepaper, youtypicallyfinalizeonlywhenthewhole paperis(essentially)finished Content itshouldstatewhatyoudidandwhy, summarizemajorresultsandhighlighttheir implicationsandimportance agoodabstractisastrongsellingpoint,makeit asdense(richininformation)aspossible rewritetheabstractseveraltimes,itisworthit!
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JiriNovak,IESUK