How to do your dissertation

It is vitally important that the project is done well for a number of reasons.
Firstly, it has a large weight in the final degree: Secondly, it can generate
substantial complementarities if the project is related to the option that you take,
or if you are gaining skills in the practical use of econometric techniques, for
example. Thirdly, it can help you get a job if you are able to let potential
employers see a well-presented project.
These notes provide advice on doing the project. Ignoring this advice may result
in you being heavily penalised when the project is marked.
If you have access to suitable hardware or software elsewhere you can use your
own computers.
You cannot use our computers until you have signed the user form. If you use
our computers:
DO NOT COPY ANY PROGRAMS ONTO OUR COMPUTERS, YOU MAY
BE INTRODUCING A VIRUS WHICH WILL DISRUPT EVERYBODY’S
WORK. DO NOT COPY PROGRAMS FROM OUR MACHINES; IT IS
ILLEGAL.
The project must be typed, bound according to University Regulations and
submitted by 30 May. It should use double spacing.
The maximum number of words is 5000.

Timetable
It is important to remember that the deadline of 30 May cannot be altered.
Anyone who hands in their project after this date will get zero marks for it. You
should therefore think of the project as an exercise in time management, as well
as an exercise both in applying the tools of economic analysis and in report
writing.
You should choose your topic as soon as possible and submit a one-page
synopsis to the Financial Economics Department Office by 30 November at the
latest. On the basis of your proposal, you will be allocated a Project Tutor, and
you should arrange to meet him/her immediately and thereafter on a regular
basis.

Topic
There are three main types of project:
a) theoretical,
b) institutional,
c) empirical.
Theoretical projects apply the tools of economic analysis to solve a theoretical
problem in economics. For example, finance theory tends to use measures of risk
whereas the world is really characterised by uncertainty: you might like to work
on developing meaningful measures of uncertainty. However, theoretical projects
are probably the most difficult to do, and the results cannot be guaranteed
beforehand.
An alternative is to do an institutional project. This involves taking a particular
set of financial institutions or markets, analysing and providing a critique of their
structure, and then possibly making policy recommendations to improve that
structure in the light of your analysis and critique. For example, you might wish
to examine the trend towards a universal banking system, and investigate
whether there is still a role for specialist financial intermediaries. Or, you might
wish to analyse the practical problems involved in running the European Central
Bank. Or, you might wish to analyse pension funding arrangements in Europe. Or
you might wish to examine the reasons why certain financial futures contracts
are introduced, but fail to survive. Institutional projects require a deep
understanding of the particular institutions being analysed and have to be
particularly well-written if they are going to avoid being turgid to read.
Most students will tend to do an empirical project. This involves taking an
existing theory or theoretical model, collecting some data (typically time series
data), and using econometric techniques on the data to test the theory or to
estimate the theoretical model. For example, you might wish to test the theory
that money causes inflation or test whether covered interest parity holds or
whether the Fisher equation holds. Or you might wish to estimate the
parameters of a consumption function or a money demand function.
You can choose any topic in the fields of economics or finance. Useful sources
of topics are: an interesting data set; your job; your option; published articles; or
members of staff. Part-time students often do work-related topics, non-UK
students often choose topics using data from their own country.
Avoid choosing a project that is too ambitious, estimating a couple of
relationships is good enough. We are not interested in whether you get good or
bad results, we want to see how you go about analysing a problem.
You can make a valuable project out of replicating a published paper, and
applying a model in the literature to the same data (then attempting to improve
on their model), or to data from a different country, industry or time period.
DO NOT BEGIN YOUR TOPIC BEFORE YOU KNOW THAT YOU CAN GET ALL
THE INFORMATION AND DATA THAT YOU WILL NEED TO COMPLETE IT.
READ PUBLISHED ECONOMICS AND FINANCE PAPERS AND TRY TO COPY
THEIR STYLE.
For examples of theoretical papers, look at the Journal of Finance, the Journal of
Financial Economics, and the Journal of Economic Theory. For examples of
institutional papers, look at the various bank reviews (Lloyds, National
Westminster) and the National Institute Economic Review. For examples of
empirical papers, look at Applied Economics, Applied Financial Economics, and
the Economic Journal. If you want to find a paper on a particular topic look at
the Journal of Economic Literature which classifies all books and published
papers by subject.
DO NOT SPEND TOO LONG OVER CHOOSING A TOPIC. AND ONCE YOU
HAVE CHOSEN ONE AND HAVE COLLECTED THE DATA, DO NOT BE
TEMPTED TO SWITCH: IT WILL PROBABLY BE TOO LATE – REMEMBER
THE DEADLINE!
Examples of previous topic titles are:
• An analysis of the top four mergers and acquisitions in 1985
• Demographic changes and how they affect house prices and owner
occupation
• Testing the Black-Scholes Model in the LDC options market
• The Argentine economic turnaround 1989 – 1993
• Theoretical valuations applied to the eurosterling convertible bond market
• Unemployment and owner occupation: is there a link?
• How foreign exchange markets react to economic data on release day
• The yield curve and consumption growth
• Latin American emerging stock markets: integration vs segmentation in a
global framework
• The effect of international capital flows on saving, investment and the price
of capital in the UK
• Forecasting the Baltic Freight Index
• Arbitrage opportunities in efficient markets
• Inside knowledge and directors’ transactions
• A comparison of technical trading rule profitability in the foreign exchange
market with other financial markets
• The impact of capital adequacy requirements on banking systems world-wide
• The effects of exchange rate variability on output and employment
• Management buyouts and the return on capital
• Equity performance and changes in exchange rate systems
• The Basic State Retirement Pension Scheme and its ability to withstand
structural demographic change
• An econometric study of stock price behaviour
• Aspects of the UK money market that may have to change as European
Monetary Union evolves
• Housing inheritance
• The “Big Bang” and UK stock market efficiency.
• The relationship between price and volume for a financial asset.
• Credit restrictions and consumer spending: is evidence consistent with an
unrestricted market?
• Theoretical/empirical model of corporate real and financial decisions.
• Testing CAPM and ARBM.
• Analysis of pension funding arrangements in Europe.
• Role and significance of professional bodies in City (e.g. Institutional
Shareholders Committee, National Association of Pension Funds, Association
of British Insurers, British Merchant Bankers Association, Fund Managers
Association, Building Societies Association, Association of Unit Trusts,
Association of Investment Trusts, etc.).
• Analysis of effectiveness of mergers between merchant banks, broking
houses and jobbing firms to create new types of investment banks post-Big
Bang.
• Analysis of debt-equity swaps in LDCs.
• Exchange rate and the stock market.
• Monetary policy and the stock market.
• Inflation and the stock market.
• Investment and the stock market.
Data
Finding the appropriate data can be the most difficult part. Make it your first
priority and check that the data is available before deciding on a topic. You can
use time-series data, cross-section data (observations at one moment in time
over countries, regions, families, etc.), or panel data which combines time-series
and cross-section.
Make sure you have enough observations and variables. The sample size plays
an important role in the precision of your results and what you can do. Aim to
have at least 30 observations for annual or cross-section data; more for quarterly
or monthly data. Unless you have experience of large data sets or help in
handling them, do not go much above 100 observations.
If you use time-series data, you must (unless you have the express permission of
your supervisor) use the most up-to-date data available, i.e. up to at least
quarter 3 of the previous year.
Sources
The best single source for UK economic data is the Office of National Statistics
(ONS). Its main publication is Economic Trends Annual Supplement. It is
published about January each year. Other similar sources are The Blue Book
(National Income and Expenditure), The Annual Abstract of Statistics, Financial
Statistics, Labour Market Trends and the Family Expenditure Survey. The best
sources of on-line financial data are Datastream and Reuters.
For international data the best sources are: World Bank publications, such as
World Development Report, OECD Main Economic Indicators, and IMF
International Financial Statistics which give internationally comparable data. For
the USA, the Economic Report of the President has an appendix which gives the
main macro data.
Getting to know your data
Make sure you know the exact definition of the data and what they are
measuring. Terms like income or prices are not acceptable. Are the variables in
current or constant prices? What is their base year? What is their coverage (Net
or Gross, National or Domestic, UK or GB)? Are they seasonally adjusted? Have
the definitions changed over the sample period?
You may have to adjust your data in various ways to deal with missing
observations, to splice series on different bases, or to convert them into
different currencies. Published data are not infallible, look for possible mistakes
in the data. You should know something about the relevant history and
institutions, such as important events like strikes, wars or changes of
government.
Once you have loaded your data onto the computer, you should conduct a
descriptive analysis. Print the data and check carefully for typing errors. Plot the
data and note the distinctive features such as trends, temporal dependencies,
seasonality, unusual observations etc. Calculate means and variances and
correlations between your variables and over time.
Repeat this process after you transform the data by taking logarithms, growth
rates or ratios. Growth rates or ratios (the savings ratio, the velocity of
circulation, the share of profits) are often more informative because they are not
dominated by trends. Very many economic models use logarithmic
transformations because the change in the logarithm is approximately equal to
the growth rate; variances are more likely to be constant; coefficients can be
interpreted as elasticities; and many interesting economic hypotheses can be
expressed as linear restrictions in logarithmic models. As part of the data
description for time-series, you should check the order of integration of the
variables and whether they are cointegrated.
Where there are a number of possible measures for a variable use all of them
and try and decide which is best. This can make a good question to raise in your
project, e.g. do wages respond more to the Consumer Price Index or the Retail
Price Index? Do not decide a priori, rather test and find out.
KEEP AT LEAST TWO BACK-UP COPIES OF YOUR DATA, ON SEPARATE
DISKS, STORED SEPARATELY. BACK UP REGULARLY.
You can lose your data in lots of different ways (one past student’s 2 year old
daughter took apart every disk in the box). It is a lot of work typing in the data
again, try to avoid the extra work.

Analysis
Conduct your research with the final written project in mind. Make sure you can
answer all the questions posed in the next section. Write fairly detailed notes of
what you are doing and what your results are as you go along. It is very easy to
forget what you did and be left with a vast pile of incomprehensible print-out.
Try and organise your investigation around a few central questions. This will
allow you to structure your specification search.

Writing Up
Leave plenty of time for writing up, since this tends to be the weakest link.
People who can do all the rest often fail to describe what they have done and
what it all means. The project must be typed and bound according to University
regulations. We will give you precise instructions to follow later in the year.
Do not submit your computer print-outs. You should process and digest the
relevant information from them, and report it in your project. Do not just
transcribe the results of performing dozens of regressions. Try to structure the
interpretation of the results: pose questions and explain how the regressions
provide answers to them. As you write the results up you are almost certain to
think of something else you need to do. So start writing up early.
You should tell us about all the things we do not know and need to know in
order to understand what you have done. Do not copy out large chunks of
econometrics text books, we know most of that, just give a reference.
ATTEMPT THE IMPOSSIBLE: TRY TO MAKE IT LIVELY AND INTERESTING.
The MAXIMUM LENGTH IS 5,000 WORDS of text, i.e. excluding tables. We
penalise excessive length, so be clear on exactly what you want to say and say
it briefly and clearly.
We strongly recommend that you write the project in the following form. The
length needed for each section will differ from project to project.
A Front page
We will provide you with an official front page for your project: all you have to
do here is type in your name and project title.
B Declaration
You must include the following signed declaration immediately after the front
page:
“This project is submitted under University of London regulations as part of the
examination requirements for the BSc(Econ) Degree in Financial Economics. Any
quotation or excerpt from the published or unpublished work of other persons is
explicitly indicated and in each such instance a full reference to the source of
such work is given. I have read and understood the requirements of the Birkbeck
College Examinations Instructions to Candidates, including the relevant
University of London regulations on Examination Tests, and in accordance with
those requirements submit this work as my own.”
C First page
This should contain a short abstract of 100 words.
D Introduction
Don’t just jump in at the middle. Introduce the subject, give some background
information and refer to any relevant literature. Then you should explain the
questions you are going to try and answer or the problems you are going to
solve, and explain why these are interesting.
E Theory
Set out the economic theory and use it to specify a model. Discuss the
economic interpretation of the parameters (elasticities, marginal propensities,
long and short run effects, etc.). Set out any a priori expectations about the
signs and magnitudes of the parameters. Set out any hypotheses to be tested:
constant returns to scale, homogeneity, unit elasticities, parameters that should
lie between zero and unity, etc. Note any identities linking the data. Discuss any
identification problems.
It is often useful to think of the economic theory as specifying: a long-run
equilibrium relationship; an adjustment process; and an expectations-formation
process. Discuss each of these separately. Think about the time-series structure
of the data. You will get into trouble if you try to explain a stationary variable
just by a single highly trended variable. Check that orders of integration match.
Remember that some theories imply that variables should follow random walks,
so the basic theoretical model is that the change in the variable is a “white
noise” error, unpredictable from earlier information.
F Data
Discuss the sources for the data, the exact definitions of variables; the sample
used for estimation; the correspondence of the data with the relevant theoretical
concepts; the possible measurement errors, etc. Describe the main features of
the series, with graphs if necessary, and point out any peculiarities or outliers.
Ask whether the series are stationary in levels or first differences.
We give credit for data collection. If you have had to do a lot of work to develop
a new or unusual data set, make sure that you describe what you have done, so
we can give you the credit (and identify any mistakes).
PRESENT THE DATA IN AN APPENDIX.
G The Statistical Model
Use the theoretical model and the probabilistic structure of the data to choose a
statistical model; linear regression model; dynamic linear regression; multivariate
regression; vector autoregression; simultaneous equations model; etc. Discuss
your choice of statistical model in terms of the assumptions it involves. You
need to convince the reader that you have made an appropriate choice. It pays
to start by trying both a simple model using just levels of the main variables
(which you may want to treat as a cointegrating regression) and a fairly general
model with lots of lags and variables.
H Estimation and Misspecification Testing
Estimate the statistical parameters of interest, and test the validity of the
assumptions underlying the statistical model (absence of serial correlation, linear
functional form, homoscedasticity, normality, constant parameters, etc.). If any
of the assumptions are rejected you should respecify the model and try again.
With luck, you should get a “well-defined statistical model” that passes all the
misspecification tests.
Report the results briefly. How you lay out and present the results is very
important. Try to copy the style of articles in the literature.
I Specification Testing and Interpretation
When you have a “well-defined statistical model”, then you can proceed to
reparameterise/restrict the statistical model in order to construct an empirical
econometric model. This involves testing economic hypotheses (e.g.
homogeneity in prices, constant returns to scale); calculating the economic
parameters of interest (e.g. long-run solutions, elasticities); and interpreting the
adjustment process (e.g. error correction, common factors).
Finally, evaluate your chosen empirical econometric model in the light of the
original theoretical model, the estimated theoretical parameters of interest, and
how your results compare with other published estimates.
If you were unable to find a well-defined statistical model, you should go
through this stage anyway, but point out that your results may be less reliable,
because of the possible misspecification.
J Conclusions
Explain the significance of your results and how they relate to the original
questions or problems posed in the introduction. What is their relevance for
practical questions of policy, forecasting, business? Are they consistent with
theory and with institutional information? Is the model statistically adequate in
representing the data?
K References
There should be a list of works cited at the end.
Remember that we do not expect every project to be publishable or even to get
very clear answers. You are evaluated on how you try, not whether you
succeed. Success depends on luck, judgement, and the characteristics of the
data. Do not be disheartened by negative results: they may be just as useful as
positive ones.
We keep your projects in your file and use them for writing references etc. So
MAKE A COPY OF YOUR PROJECT FOR YOURSELF BEFORE HANDING IT IN.
Many past projects have subsequently been published and we are happy to
advise you after the exams on whether your’s can be turned into a publishable
piece.

Guidelines for Project Supervision on Undergraduate Degrees

It is the student’s responsibility to choose the topic of their research project.
Students have to fill in a project proposal (before the end of the Christmas term)
and it is on the basis of this proposal that they will be allocated a project
supervisor. The supervisor who is allocated to a student will be the most
appropriate given the proposed topic, but because of obvious constraints
involved in matching supervisors and topics, students cannot necessarily expect
to get the supervisor of their choice or one who is necessarily an expert in the
area of their topic. So students should have a fairly clear idea of what topic they
wish to pursue before the very first meeting with their supervisor. Do not forget
it is your project, not the supervisor’s!
The following guidelines are designed to help students get the most effective
use from their relationship with their supervisor:
1. You can have up to five meetings with your supervisor, comprising:
(a) A short preliminary meeting of about 10 minutes (you should ensure that
you arrange this meeting as early as possible, and certainly before the
end of January)
(b) Four meetings lasting up to 15 minutes each.
2. During the course of your meetings with your supervisor, you can expect to
get the following help or advice on:
(a) Project proposal - your supervisor will assess the suitability of the
proposed project.
(b) Literature search - ideally, you should already have made a search and
review of the literature by the time of the first meeting with your
supervisor (you can use ECON.LIT in the library to make a literature
search). The supervisor should point out any obvious omissions.
However, in cases where a student is having trouble in choosing a topic
the supervisor might offer suggestions about a relevant topic in the
literature. Also in cases where, in the light of discussions with the
supervisor, it becomes clear that for whatever reason, the original project
proposal is not suitable, the supervisor should offer suggestions as to a
more realistic topic and also to the relevant literature.
(c) Data collection - the supervisor may be aware of data sources relevant to
the project, but it is your responsibility to ensure that any data needed for
the project is available or can be collected in reasonable time and at
reasonable cost (the College does not pay for any data used on student
projects). However, the supervisor should be expected to assess whether
the proposed data set is suitable/feasible for the purposes of the project.
 (d) Data analysis - you should make yourselves aware of the statistical and
econometric software supported by the department and and also their
limitations (you can ask the Computer Manager about these). Your
supervisor may be aware of other software, but it is your responsibility to
ensure that the software you propose to use is suitable/feasible for the
project.
(e) Presentation - your supervisor should provide general advice on
presentation, ordering of sections etc, but you cannot expect help with
style, use of English, grammar etc.
3. If your supervisor agrees to take a look at your project before it is handed in,
you should allow him/her one week to do so (this should occur in early May at
the latest). But, you can only expect to receive comments on the presentation
and general cohesion of the project, not on the quality or standard of the
project.
It is the responsibility of students to develop a good relationship with their
supervisor, but if they are having difficulty doing so, they should bring this to
the attention of the Programme Director who will attempt to mediate and in
exceptional cases change the supervisor.
As in other modules of the degree, students can fill in an assessment form
concerning the project supervision they have had.

Guidelines for Project Assessment on Undergraduate Degrees

The fourth-year project has a very significant weight in the final degree
classification. Because of this, we wish to ensure that when a project is
assessed by us, we are provided with as much information as possible.
As part of our efforts to improve our assessment procedures and to provide
checks against plagiarism, the following rules apply:
1. Supervisors will monitor and record the work-in-progress of the students
that they supervise.
2. A number of students will have their projects orally examined. Students
who have not maintained regular contact with their supervisor will be
more likely to face an oral examination, but there will be a significant
amount of randomness to the selection process.
3. Students are required to submit with their final project, a diskette
containing: (a) the text of their project, (b) the data (if any) used in their
project, and (c) the regression output (if any) used in their project.
These procedures are designed to ensure that all submitted projects are the
genuine work of the student concerned.
Furthermore, students should be careful to avoid showing their projects to other
students in order to minimise the chance of their projects being submitted as the
work of another student registered with a different college, with the possible
requirement, at a later date, to prove that the project is indeed their own work.