Project Students Will Write A Final Paper That Answers A Res ✓ Solved

Projectstudents Will Write A Final Paper That Answers A Research Ques

Students will write a final paper that answers a research question by utilizing risk models. The paper should consist of an introduction section that clearly states motivation and research question or hypothesis, data and methodology section that includes discussion on strengths and weaknesses of your method/model, results section that presents the findings of the model, and conclusions section that answers the research question and highlights valuable takeaways. The final paper should be no longer than 10 pages double spaced using Arial font size 11 with 1-inch margins and submitted by the due date as indicated.

The written paper is worth 200 points, while the presentation is worth 100 points.

Examples of successful research papers include topics such as: “Investment Risk and Firm’s Market Capitalization,” “Are Islamic Banking Compliant ETFs safer than the Traditional ETFs?,” “Comparing the Risk of Companies with Male CEOs to the Risk of Companies with Female CEOs,” and “Is energy industry safer than the automotive industry?”

Sample Paper For Above instruction

Title: Assessing Investment Risk Relative to Market Capitalization

Introduction

The motivation behind this research stems from the hypothesis that firm size, as indicated by market capitalization, influences the risk profile of an investment portfolio. Larger firms are often perceived as more stable, thus potentially exhibiting lower risk, whereas smaller firms might present higher risk but also higher growth opportunities. This paper aims to analyze the relationship between firm size and investment risk using advanced risk modeling techniques.

Data and Methodology

Data was collected from the S&P 500 index, encompassing a period of 10 years from 2013 to 2023. The primary risk models employed include Value at Risk (VaR), Conditional VaR, and the GARCH model to capture volatility dynamics. The strengths of these models include their ability to incorporate time-varying volatility (Engle, 1982) and to provide probabilistic risk estimates. However, limitations include assumptions of liquidity and the reliance on historical data, which may not fully predict future risks (Jorion, 2007).

Results

The analysis revealed that smaller firms tend to have higher volatility and VaR estimates, supporting the hypothesis that smaller size correlates with increased risk. The GARCH model showed periods of heightened volatility during economic downturns, aligning with existing literature (Bollerslev, 1986). These findings suggest that investors should consider firm size as a critical factor when assessing risk.

Conclusions

In conclusion, the study confirms that firm size significantly influences investment risk, with smaller firms exhibiting higher risk levels. This insight can inform portfolio diversification strategies. Future research could incorporate macroeconomic variables to better capture external risk factors.

References

• Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31(3), 307-327.
• Engle, R. F. (1982). Autoregressive conditional heteroskedasticity with estimates of the variance of U.K. inflation. Econometrica, 50(4), 987-1007.
• Jorion, P. (2007). Value at Risk: The New Benchmark for Managing Financial Risk. McGraw-Hill.
• Other relevant sources on risk modeling and firm size.