what’s hot in finance (2007-11)

8/9/2019 What’s Hot in Finance (2007-11)

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Electronic copy available at: http://ssrn.com/abstract=2142203Electronic copy available at: http://ssrn.com/abstract=2142203

What’s Hot in Finance

(2007‐11)

Students of F798

(Indiana University)



Electronic copy available at: http://ssrn.com/abstract=2142203Electronic copy available at: http://ssrn.com/abstract=2142203

Who

is

Winning?Impact Factor Data from Journal Citation Reports®:

http://admin‐apps.webofknowledge.com/JCR/JCR?RQ=HOME

JF, 4.218

JFE, 3.725

RFS, 4.748

JFQA, 1.775ROF, 1.591

JPE, 2.902AER, 2.693

QJE, 5.92

0

1

2

3

4

5

6

7

2007 2008 2009 2010 2011



What’s hot?

Journal of [email protected]



Background

• Each issue of the journal reaches over 8,000academics, finance professionals, libraries,

government and financial institutions around theworld.

• Published six times a year

• Editorial Board

– Editor:• Kenneth J Singleton, Stanford University

– Co-Editors

• Bruno Biais, Toulouse School of EconomicsMichael R. Roberts, University of Pennsylvania

9/4/2012 2



9/4/2012 3

Submission Process in DetailProcessing

TimeNumber

Cumulative

Percentage

Less than 20

days 2700 25.30%

20-29 days 553 30.40%

30-39 days 1207 41.70%

40-49 days 1539 56.10%

50-59 days 1097 66.40%

60-69 days 810 74.00%

70-79 days 563 79.30%

80-89 days 430 83.30%

90-99 days 392 87.00%

or more1393 100.00%

Median

turnaround 45

Number Percentage

Rejected 8274 77.40%

Returned forRevisions

1837 17.20%

Accepted 573 5.40%

Total 10684 100.00%

Rejected Revise Accepted

Round 1 8155 1006 2

Round 2 98 534 102

Round 3 19 236 246

Round 4 2 57 171

Round 5 0 4 50

Decisions by Round

Editorial Decisions



9/4/2012 4



Asset Pricing• Classic

– Term Structure (evolvement of theoretical models)

– Treasury bond • Information and liquidity risk pricing

– Long-horizon risk of equity

– Portfolio choice

• Financial crisis (discussion for the reasons)

• Link with corporate finance

– Momentum and credit rating

9/4/2012 5



9/4/2012 6



Corporate Finance I• Classic (old topics, new methodology)

– Capital structure, M&A, financing & investment

• Corporate governance (interaction with other fields)

– Governance and information flow, labor, capital structure – Governance tradeoffs

– CEO compensation, board structure / inside debt, entrenched managers

• Interaction between the firm and the financial markets (security studies) – Security design to induce information from the equity market

– Feedback effects• 2-way feedback

• Corporate bond (less explored ) – Transparency, transaction cost

9/4/2012 7



Corporate Finance II• Private/public firms (less explored )

– Different financing cost (data from UK)

– The decision to go private

• Discount rate (Presidential address)

• Shareholder proposal

• Venture capital, innovation (new and booming)

9/4/2012 8



9/4/2012 9



Microstructure I• Liquidity (travelled a lot )

– liquidity and law of one price

– liquidity crises: predatory trading liquidity coinsurance,

crisis liquidity or credit risk? – liquidity and transaction cost, analyst disagreement and

mispricing

• Trading (linked to behavioral issues) – limited attention and allocation of efforts to trading

– Reputation effects

– Trust and limited participation in the stock market

– Trade initiation from market sideness – Sensation seeking, overconfidence

9/4/2012 10



Microstructure II• Short sale (special data and event study)

– Use it a background to test other theories

– Supply and demand shifts in the shorting market(proprietary data on stock loan fees and quantitiesfrom a large institutional investor)

– Short-sale constraints and price discovery

(evidence from Hong Kong)

– Effects of the Securities and ExchangeCommission (SEC)-mandated temporarysuspension of short-sale price tests for a set ofPilot securities

9/4/2012 11



Investment• Hedge fund/ Mutual fund (with a focus on

managers)

– High-water-mark compensation contracts

of hedge fund managers and their portfolio

choice

– Shareholder activism

– Managerial ability and closed-end fund

– Director ownership in the industry

9/4/2012 12



New topics / methodologies• Internet, Media, Sports

• Corporate speculation/ hedging

• Labor • Labor and corporate governance (union laws, international evidence)

• Human capital and equity investment as portfolio choice

• Share Repurchases and Pay-Performance Sensitivity of EmployeeCompensation Contracts

• Work Ethic, Employment Contracts, and Firm Value• Employee stock options and investment

• Political uncertainty

• Corporate investment

• Textual analysis

9/4/2012 13



What’s

Hot

in

JFE

(2008

– 2012)



JFE

Facts• Journal of Financial Economics, Published by Elsevier.

• Operated by Simon School of Business at University of

Rochester.

• First issue published in May 1974, now published monthly.

• Principle:

“Papers that raise a new question or pose an old one in an innovative

way and papers that test theories in specialized ways or document

interesting phenomena which are likely to stimulate new research are

emphasized.”

• What we pay:

– Subscriber $600.

– Nonsubscriber $650.



JFE

Facts• What we get:

– Median Turnaround 28 days.

– Acceptance Rate 10% (out of 1237).

– 2011 Impact Factor: 3.725. Third in Finance.

– 5‐Year Impact Factor: 5.676.

– Two‐Stage Review Process:

• 1. “I will screen all submissions and determine whether, even if the claims of

the authors are correct, the topic of the paper is of sufficiently broad interest

to warrant publication in the JFE . If I determine that the paper does not meet

that standard, I will send a quick rejection letter and refund all but $100 of the

submission fee. The submitting author will receive no referee's report and there

will be no right of appeal. My goal is to have fewer referees' reports that merelysay "this paper is OK, but just not interesting/broad enough for the JFE .“”

• 2. Real review process.



Number

of

Articles

9792

101

136

103

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012



Theoretical

vs.

Empirical

168

1311

13

8184

88125

90

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

Theoretical Empirical



Trend

by

Areas

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

Other

Microstructure

Investment

Corporate Finance

Asset Pricing



Asset

Pricing

Topics• Pricing of Specific Assets

– Derivatives

– Fixed Income

–

Mortgage backed Securities• Explaining Empirical Facts

– Return Predictability

– Anomalies and Puzzles

– Cross‐Sectional and Time Series of Returns

–

International Facts• New Pricing Factors and Models

– Macro Models

– Liquidity Factor

– Political Factors

•

Other Topics – Sentiment

– Short Selling Constraint

– New Methodologies



Corporate

Finance

Topics• Firm Financial Decisions

– Capital Structure

– Investment Decision

– Payout Decision

– Loan Financing – Market Timing

• IPO and M&A – IPO Decision and Wave

– Analysts’ role in IPO and M&A

– Information Asymmetry and Agency Problem

• Managers and Governance – Compensation and Incentives

– Board and Monitoring

– Executive Behavior

– Legal Factors

• Other Topics – Venture Capital and Entrepreneurship

– Political Factors

– International Facts



Corporate

Finance

Topics

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

Other

Managers & Governance

IPO and

M&A

Financial Decisions



Microstructure

Topics• Market Design and Rules

– Opaqueness and Market Fragility

– Cross‐Listing

– Short Selling

• Limit Order Market – Dynamic Limit Order Book

–

Impact of Limit Order• Investor Behavior and Trading Strategies

• Information and Liquidity – Liquidity

– Informed Trading

– Microstructure and Asset Pricing



Microstructure

Topics

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

Informativeness & Liquidity

Investor Behavior & Strategies

Limit Order

Market

Market Design & Rules



Investment

Topics• Mutual Fund

– Performance

–

Flow of Liquidity – Regulation

• Hedge Fund

• International Investment

• Other Topics – Sovereign Fund

– Sentiment

– Religion, Sin Stock.



Investment

Topics

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

Other

International

Hedge Fund

Mutual Fund



Other

Topics• Banking

– Bank Liquidity and Failure

– Loan and Credit Lines

– Banking and Corporate Finance

• Bubbles and Crisis

– Causes of Bubbles and Crisis

– Impact on Markets and Economy

– Mortgage Market – Microstructure Explanations

• Other Topics

– Legal and Political Connection

– Investor Sentiment – Credit Rating

– New Methodologies



Other

Topics

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

Other

Bubbles & Crisis

Banking



Conclusion• There are more topics that cannot easily be categorized

within purely one area.

• Techniques from one area are more frequently to be applied

to other areas.• More theoretical papers contain an empirical part or at least

simulations.

• Many novo research questions emerged after the crisis.

• Corporate Finance: Hottest but Cooling Down

• Asset Pricing: Slightly Hotter

• Microstructure: Hold

• Investment: Hold (Mutual Down, Hedge Up)• Other Topics: Hotter (Esp. Sentiment)



What’s Hot in the Review of

Financial Studies



About The Review of FinancialStudies

• The Review of Financial Studies (RFS) is highly

respected journal within the finance literature• 2011 Impact Factor of 4.748 ranking it number 1 of 86

Business and Finance Journals

• Impact trending up

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2007 2008 2009 2010 2011

Impact Factor



Submission Process

• Submit your manuscript

• Decision made within 120 days or your money

back (Median turnaround 45 days)

• Goal to have decision within two or three rounds

• Acceptance Rate: 6.8%



Other Notes

• Current Executive Editor: David Hirshleifer

• Previous Editor: Matthew Spiegel (2005-2011)

• Did not publish monthly until 2009



Articles by Year

0

20

40

60

80

100

120

140

160

2007 2008 2009 2010 2011 2012

2007

2008

2009

2010

2011

2012



Are you a Theorist or Empiricist?

0%10%

20%

30%

40%50%

60%

70%

80%90%

100%

2007 2008 2009 2010 2011 2012

Theory

Empirical

Both



What About Content?

0%10%

20%

30%

40%

50%60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012

Topics by Year

Other

MMInv

CF

AP



Asset Pricing

• Pricing of Specific Assets• Explaining of Empirical Facts

• Other Topics –New Methodologies

–Sentiment



Asset Pricing

0%10%

20%

30%

40%50%

60%

70%

80%90%

100%

2007 2008 2009 2010 2011 2012

Pricing

Other

Exp Emp Facts



Corporate Finance

• Firm Financial Decisions

• IPO’s / Mergers and Acquisitions

• Managers and Governance

• Other Topics

– Venture Capital

– International Facts



Corporate Finance

0%10%

20%

30%

40%50%

60%

70%

80%90%

100%

2007 2008 2009 2010 2011 2012

Other

Mgr GovnIPO M&A

Firm Fin Dec



Investments

• Mutual Funds

• Hedge Funds

• International



Investments

0%10%

20%

30%

40%50%

60%

70%

80%90%

100%

2007 2008 2009 2010 2011 2012

MF

Intl

HF



Market Microstructure

• Market Design and Rules• Limit Order Market

• Investor Behavior and Trading• Information and Liquidity



Market Microstructure

0%10%

20%

30%

40%50%

60%

70%

80%90%

100%

2007 2008 2009 2010 2011 2012

Mkt Des Rules

Lim Order Info Liq

Inv Beh Trad Strat



Other Topics

• Banking• Bubbles and Crisis

• Other Topics –Politics

–Credit Ratings



Other Topics

0%10%

20%

30%

40%50%

60%

70%

80%90%

100%

2007 2008 2009 2010 2011 2012

Other

Bubbles/Crisis

Banking



Conclusions

• Empirical studies are dominating

• Asset Pricing and Corporate Finance

are hot

• Large shocks increase “Other” papers

• Crossover in categories increasingwith time



2007 – 2011

What’s Hot in JFQA



About JFQA• Subjects: Banking, finance & investing, quantitative research

• Description: Theoretical and empirical research in financial economics, including corporatefinance, investments, capital and security markets and quantitative methods of particularrelevance to financial researchers.

• 4 Editors: University of Utah (1), NYU (1), University of Washington (2)

• More information on JFQA: http://journals.cambridge.org/action/displayJournal?jid=JFQ#



Publication Process• Began publication in 1966

• Published by: University of Washington (in cooperation with University of Utah and NYU,and Cambridge University Press)

• Issued every other month beginning in 2009 (previously, issued quarterly)

• $250 submission fee (effective July 1, 2012)

• Acceptance rate for submitted articles = 8%

• +600 manuscripts submitted annually



Number of Articles



Theoretical vs. Empirical



Corporate Topics• Firm financial decisions

– Capital structure

– Investment decisions

– Payout decisions (dividend and repurchases)

– SEOs

• IPOs and M&A

– Signaling

– IPO pricing – IPO and M&A incentives

– Role of governance

• Managers and Governance

– Board changes

– Managerial characteristics – Compensation

• Other Topics

– Corporate event waves

– Ownership structure



Corporate Topics



Asset Pricing Topics• Specific asset pricing

– Fixed income

– Derivatives

– Credit default swaps

– Currency rates

• Returns analysis

– Cross section and time-series

– Liquidity shocks and returns – Risk and return

– Momentum

• New pricing models

– CAPM using new econometric techniques

– New liquidity/volatility measures• Other

– Valuation (firm, annuities)

– Returns in emerging markets



Asset Pricing Topics



Microstructure• Market quality and information

– Liquidity and order flow – Trading volume

– Exchange rate co-movements

– Information quality

– International market integration

– Market timing• Trading strategies and investor type

– Informed traders

– Anonymous trading

– Trading strategies in options

• Other

– Auctions

– Delistings

– Transaction costs



Microstructure Topics



Investment• Venture capital

– Governance

– Reputation

– Conflicts of interest

• Hedge funds

– Risk

– Return smoothing• Portfolio management

– Performance

– Selection

– Investment styles

• Mutual Funds

– Asset allocation

– Performance

– Governance



Investment Topics



Other topics• Accounting

– Analysts (forecasts, emerging markets)

– Earnings management

– Earnings announcements

– Taxes

• Investment banking

• Bankruptcy and financial distress costs• Behavioral

• Other

– Legal actions (shareholder rights)

– Political markets

– Innovation

– Labor markets

– Family firms

– Bubbles

what’s hot in finance (2007-11)

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