So, for this final blog post I have been asked to reflect on the ‘challenges, triumphs, disappointments and learning experiences’ of writing this report thus far. I have to say, at the start of the semester I felt completely overwhelmed with this subject, and really struggled to come up with a research topic. I kept being told by Kankeshu, classmates and friends that I just needed to pick something that ‘interests’ me. That was the hardest part! I couldn’t find something I was interested in that met all the criteria necessary: a) enough literature to write a literature review but b) not too much literature that the topic had been thoroughly researched before, c) a topic with a research gap but d) not a research gap too wide that I would be choosing something that required more than 13 weeks of writing and e) a topic that had raw data! In the end, I ended up picking the first topic I had thought of, and I’m actually really glad I did, because as the weeks go by and the more I delve into it, the more interested I become.

I think for me, the biggest challenge is still to come, that is, running my regression analysis on EViews. At this point, I have accumulated all my raw data and am currently organising it into my excel spreadsheets, in a format that will be recognisable by Eviews to run analysis on. While I am confident in my ability to run a Chow Break Point Test (as I actually just covered this in ECON339), I am very apprehensive/nervous regarding my ability to conduct the event study. This is because there is no single function in EViews that can compute my data in this way, so I believe this will be incredibly challenging and very time consuming.

One of the things I am super happy with in terms of my project is my literature review. I believe I covered nearly all aspects of the literature review for my research proposal and gained a deep understanding as to how events can alter the price of stocks in the market. This solid preliminary literature review means that I can spend more time focusing on my methodology for my final paper, and only add in extra literature where is needed.

The biggest learning experience has been in regards to time management. This is the most unique subject I ever taken and it has been a challenge to learn how to prioritise writing this paper, especially with hardly any face-to-face classes or lectures. I know the next 4 weeks before the final report is due will be challenging, especially considering that I am reaching the most difficult part of the report and this coincides with end of session and needing to study for finals.

I also think I came up with a title for my paper: ‘Is the real world like Monopoly? Do the Banks always come out on top?: An Investigation into the Impact of the Banking Royal Commission on the Share Prices of Banks in Australia’

Signing out one last time,

Alexia #FW

Just under two weeks ago I presented my research proposal to half of my cohort! While I was feeling nervous about doing so, it was quite encouraging to speak about the topic I have been working on, to eager ears. 

It was beneficial articulating my current progress to the class, as it inevitably caused me to understand my topic’s evolution to this point. It also elucidated the work that still needs to occur in preparation for the final report.

One comment/question from a peer was regarding what the motivation behind researching the Royal Commission was. I am unsure if I had mentioned it in a previous blog post, but I interned at a Law Firm which represented one of the Big 4 Banks during the Commission and this is what sparked my interest in the field. 

Furthermore, the bulk of my feedback was regarding the ‘event period’ and ‘estimation period’. I had decided that my event period would cover a period of 5 days from the 30^thJanuary – 4^thFebruary. This decision was made because even though the Royal Commission report was handed down on the 4^thFebruary, it is important to capture the time in which the market would anticipate such news, and preliminary research has suggested the market felt reverberations in the days prior to the publication. Secondly, I received advice to make my estimation period 6 months before the publication, as this would exclude the effects of the interim report on share prices. This was sound advice and I believe I will be implementing a six month time frame.

My largest challenge at the present time, is using EViews and running my regression analysis. While the data is readily available via yahoofinance, I am not competent in using this software as yet, and I assume it will take a lot of trial and error to create data sets that are able to be read by EViews. I have also thought about implementing the ‘Chow Test’, which looks at a set of data and determines whether there is a structural break in the data. I just learnt how to do this in ECON339 and it is a common methodology used when assessing the impact of an event. 

My strategy for project completion is to complete my regression analysis as soon as possible, giving me ample time to consider and analyse my results. While I know the deadline is fast approaching, it will be important for me to balance my time between this report and all my other assessments. 

#FW 

Massive week in terms of preparation for the research proposal. I’ve done what feels like years of research and read what feels like millions of different pieces of literature.

However, I feel like I’ve made some progress! I have broken down my research into five distinct parts:

1. Efficient Market Hypothesis;
2. Literature surrounding the Banking Royal Commission;
3. Reasons for changes in share prices of banks;
4. The influence of political events on share prices; and
5. Event studies as a methodology form

I realised quite early on (and as I alluded to in the previous blog post), that academic literature concerning the Royal Commission is extremely scare (mainly due to the fact that it happened so recently). The literature I have found is framed in a legal context and hence, not overly helpful. It has helped contextually however. 

I have realised the most important parts of my research are points 4) and 5). I have chosen to frame the Royal Commission as a political phenomenon in Australia, and hence, the literature surrounding the influence of politics on share prices of companies has been extremely useful. However, most of the literature concerning this niche area is surrounding times of political uncertainty or upheaval. At this point in time, there is no literature which looks to the effect of such a political phenomenon like a Royal Commission and its effect (and hence – I have found my research gap!). Regardless of this, all of the scholars tend to come to the same conclusion after completing their research and running their analysis: that major political events have a profound impact on the prices of shares and the stock market and depending on the type of political announcement, can have a negative or positive effect.

I have also decided to not look at the four big banks exclusively anymore. I have chosen to add AMP into the mix, specifically because it seems to be the financial institution that has been hit hardest by the findings of the Commission. 

In my research, I have also found literature that has conducted studies similar to what I intend to do. As you have probably read in my previous blogs, this is the part of the project I was most stressed about. After deliberating and reading a lot of technical econometrics jargon, I believe the methodology I will implement will be ‘Event studies’ which as the name suggests assesses the impact of an event on the value of a firm. Put simply, the model estimates what the ‘normal’ returns of a firm should be by looking at the returns prior to the event, and compares this to what the actual returns are during and after the event. This is an area I will focus on this week, trying to formulate an appropriate regression for the data I have acquired.

Next week my research proposal is due, so the majority of my study time this week will be spent on writing that and trying to pull all these pieces of this royal-commission-extremely-large-and-difficult-puzzle together. Wish me luck! 

This week marked the true beginning of serious research for me. I think I have used every single database available to me as a UOW student and have lost track of the amount of times I’ve typed in “Royal Commission”, “Banking Royal Commission” “Regulation of Australian Banks” “Cause of changes in share prices”, “Four Pillar Policy” “Supervision of Banks” “Efficiency of Australian Banks” into these search engines. 

The perfect metaphor for the research journey for me is that of a rabbit’s warren. The further I start digging, the more I uncover and the broader my topic becomes. I have decided that if I am researching the effects of the Royal Commission into the Bank’s Performance, it is important to firstly understand the nature of regulation and supervision in the Banking Industry. My research so far has been centred around the regulation surrounding banks in Australia and how this effects their performance in a market economy that supports deregulation. Further, it has been interesting to note the effects of the Four-Pillars Policy on banking efficiency in Australia. In investigating further into this area of regulation, I have also been reading on the BASEL accords and its effect on the performance of banks. All of this is preliminary secondary research which has given an indication of how the banks normally react to changes in the regulatory sphere, setting up context for how the banks ‘should’ react to the findings of the Royal Commission. I believe understanding the context of the climate of the Australian Financial sector is necessary to conduct my own unbiased and well-informed research. 

While there has been a multitude of research conducted into the above, what I am finding most difficult is the lack of academic literature surrounding the Royal Commission itself. I alluded to this issue last week but after further extensive research, I have realised it is too early/too soon for academics to have been writing on this topic. This seems to be a road-block in my research, and I will really have to turn to newspaper publications (such as the Australian Financial Review) for academic literature into the bank’s reaction to the Royal Commission. This is something I have begun and hope to expand upon in the coming week. There is definitely not a shortage of media articles surrounding the Commission, it will just be a mission to select the articles which are well-researched and not biased (as we all know news can be! #fakenews). So far, it has been interesting to read how Westpac, CBA, NAB and ANZ have reacted differently to the findings of the Royal Commission, and I am hoping my primary data that I will acquire shortly will also reflect the findings of the literature I have read so far. 

While I have briefly looked into acquiring my data (which I know is readily available due to the nature of the big four banks being publicly listed companies), this has not been a focus of my research this week, and will look into this in the coming week.

To be completely honest, I feel like I have fallen down the rabbit’s warren multiple times this week with my research and keep delving deeper than necessary, which is setting me back in terms of time management. I know I need to focus on my initial research questions, and stick to them!

– Alexia #FW