Investments Bachelor Seminar Finance: Institute of Finance and Commodity Markets
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Bachelor Seminar Finance:
Investments
Institute of Finance and Commodity Markets
Prof. Dr. Marcel Prokopczuk
Winter Term 2021 / 2022Requirements
• Preparation of a seminar paper in groups of up to 3
• Scope: 15/20/25 pages (depending on group-size)
• Independently perform empirical / quantitatively analysis
• Use of appropriate statistics software
• Pure literature review is not sufficient
• Presentation of seminar paper in block seminar
• Assessment: 60 % written work and 40 % Presentation
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/2022Procedure
• 14.07.2021, Kick-Off-Meeting with topic presentation
• 19.07.2021, submission of preference via email (seebonn@fcm.uni-hannover.de)
• 21.07.2021, allocation of topics (I will send you an email)
• 23.07.2021, submission of binding registration form via email
• 12.11.2021, submission (before 11 AM) in my office (or via email if student access to the building remains
restricted)
• Mid December (TBA): Presentation (possibly online)
• General information and registration form:
https://www.fcm.uni-hannover.de/de/lehre/seminare/bachelor/seminar-finance-investments-273012/
• Grading specification form:
https://www.fcm.uni-hannover.de/fileadmin/fmt/pdf/seminare/Bewertungswahl.pdf
• Guideline for writing seminar papers:
https://www.fcm.uni-hannover.de/fileadmin/fmt/pdf/Richtlinien_zum_Erstellen_von_Seminar-
_und_Abschlussarbeiten.pdf
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/20221) Volatility Targeting
Task:
• A simple strategy that attempts to keep portfolio variance constant.
• Implement the strategy for a non US-stock sample (other asset class / other country) and analyze the risk profile (Maximum draw
down, tail risk, etc.) and / or compare it to a similar approach like risk-parity.
Literature:
• Moreira, A. & Muir, T. (2017): Volatility-Managed Portfolios. The Journal of Finance, 72(4), 1611-1644.
• Harvey, C. R., Hoyle, E., Korgaonkar, R., Rattray, S., Sargaison, M., & Van Hemert, O. (2018): The impact of volatility targeting. The
Journal of Portfolio Management, 45(1), 14-33
• Liu, F., Tang, X., & Zhou, G. (2019): Volatility-Managed Portfolio: Does It Really Work? The Journal of Portfolio Management, 46(1), 38-
51
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/20222) Portfolio Optimization: Naïve vs. Mean-
Variance
Task:
• Modern portfolio theory attempts to either maximize the portfolio expected return for a given risk or minimize the risk for a given
level of expected return.
• Briefly describe the concept of mean-variance optimization and compare its performance with the naïve approach in an empirical
analysis.
Literature:
• Brandt, M. W. (2009): Portfolio choice problems. Handbook of Financial Econometrics, 1, 269-336
• DeMiguel, V., Garlappi, L., & Uppal, R. (2007): Optimal versus naïve diversification: How inefficient is the 1/N portfolio strategy?.
Review of Financial Studies, 22(5), 1915-1953
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/20223) Financial Crisis and Dependencies
Task:
• Dependence among extreme events, such as extreme losses during the financial crisis are referred to as tail dependence.
• The dependence of tail events do not have to be similar to the dependence structure of ordinary observations.
• Briefly describe the approach proposed by Oordt and Zhou (2012) and apply it to real data.
Literature:
• van Oordt, M. R., & Zhou, C. (2012): The simple econometrics of tail dependence. Econometric Letters, 116(3), 371-373
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/20224) Return Seasonalities
Task:
• Keloharju et al. (2016) find return autocorrelation at full-year lags throughout asset classes.
• Explain why asset returns should or should not exhibit seasonal patterns.
• Perform an empirical analysis using assets / portfolios of your choice (e.g. country indices, industry portfolios, etc.)
Literature:
• Heston, S. L., & Sadka, R. (2008): Seasonality in the cross-section of stock returns. Journal of Financial Economics, 87(2), 418-445
• Keloharju, M., Linnainmaa, J. T., & Nyberg, P. (2016): Return seasonalities. The Journal of Finance, 71(4), 1557-1590
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/20225) Momentum Crashes
Task:
• Momentum refers to abnormal returns of long-short portfolios that buy past winners and sell past losers.
• This strategy applied to sorted portfolios seems to break down after market downturns.
• Investigate, if this pattern is also present in industry portfolios, which have been shown to explain individual stock momentum.
Literature:
• Jegadeesh, N., & Titman, S. (1993): Returns to buying winners and selling losers: Implications for stock market efficiency. The Journal
of Finance, 48(1), 65-91
• Moskowitz, T. J., & Grinblatt, M. (1999): Do industries explain momentum?. The Journal of Finance, 54(4), 1249-1290
• Daniel, K., & Moskowitz, T. J.(2016): Momentum crashes. Journal of Financial Econometrics, 122(2), 221-247
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/20226) The January Effect
Task:
• Describe and review the January effect.
• Empirical investigation of the January effect for multiple markets.
Literature:
• Keim, D. B. (1983): Size-related anomalies and stock return seasonality: Further empirical evidence. Journal of Financial Economics,
12(1), 13-32.
• Keim, D. B. (1985): Dividend yields and stock returns: Implications of abnormal January returns. Journal of Financial Economics, 14(3),
473-489.
• Kling, G., & Gao, L. (2005): Calendar effects in Chinese stock market. Annals of Economics and Finance, 6(1), 75-88.
• Thaler, R. H. (1987): Anomalies: The january effect. Journal of Economic Perspectives, 1(1), 197-201.
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/2022How to write a good seminar paper
• Do not underestimate the time and effort required.
• Read good papers and adapt their style of writing and presenting results.
• Use reliable sources (books, journal papers, Datastream).
• Try to avoid biases like survivorship bias or look-ahead bias.
• Never report and interpret average returns just by themselves. Relate them to risk (e.g. via Sharpe ratio or
alphas).
• Employ statistical techniques (e.g. t-tests or regressions) to test your hypothesis.
Institute of Finance and Commodity Markets | Prof. Dr. Marcel Prokopczuk | Winter Term 2021/2022How to maximize the learning effect
• Everything you learn in this seminar will help you when writing your thesis!
• Use R or Matlab instead of Excel.
• Attend Programming for Finance but start coding by yourself before.
• Use LaTeX instead of Word.
• Write in English, not in German.
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