辅导 C31RF Empirical Financial Modelling 2024 - 2025辅导 C/C++程序

C31RF Empirical Financial Modelling 2024 - 2025

Course Work: Panel Data Analysis

1.   Overview

  This mid-term assignment is based on 30% of total marks in C31RF on an individual project.

  Submission format: each student submits the assignment in Canvas.

  Deadline for submission: Week 8 Monday 3rd March 2025 4pm.

2.   Background

Banks play a crucial role in an economy by efficiently allocating scarce resources to potential borrowers with the most promising prospects. However, under conditions of uncertainty, where relative prices can no longer be predicted with precision, the efficient allocation of funds may fail to materialize.

Research has demonstrated that reductions in loanable funds can significantly impact bank- dependent borrowers, such as small  businesses. These borrowers may face substantial reductions in their fixed investment expenditures or, in extreme cases, bankruptcy (e.g., Ivashina and Scharfstein, 2010; Ferri et al., 2014). This  underscores  the  importance  of understanding of the factors that influence banks’ lending behavior, a topic that has garnered renewed attention from researchers in the aftermath of the 2008 financial crisis. The crisis had far-reaching repercussions for both developed and emerging economies throughout the globe.

In this coursework, you are tasked with empirically examining the relationship between uncertainty and banks’ lending behavior. The  literature suggests that this relationship is influenced by a combination of bank-specific characteristics (e.g., size, profitability, liquidity, non-performing loans) and macroeconomic  variables  (e.g., GDP growth rate, long-term interest rates). Therefore, these factors should be incorporated into the analysis to provide a comprehensive understanding of the topic.

3.   Data

You can download the data file (Excel) from Canvas that contains a large panel of commercial banks collected from the Fitch for UK banks. Note that the total loans and total net loans data are currently in logarithmic format, please take the first difference. The analysis covers the period between 1999 – 2014.

4.   Reports Requirement

1)  Establish your hypothesis.

You need to give prediction in a hypothesis based on literature (You should find more related literature to support your hypothesis). For example, H1: There is a positive (or negative) relation between XXX and XXX.

2)  Briefly describe the research method you intend to employ.

This should include: what is the model (formula)? what is the dependent variable? And what are independent variables and control variables?

3)  Demonstrate empirical results.

You are required to employ proper model(s) you learn from this course. Results should be demonstrated in well-organized table(s).

  Do not copy the original format of tables from E-views or Stata!

  Look at papers on how they present tables!

4)  Briefly discuss your results and give the conclusion(s).

5)  Briefly discuss the limits and potential problems of this research.

6)  Optional Opportunity for Individual Initiative: In this part of your Report, you have the opportunity (if you wish to use it - not compulsory) to discuss other potential additional variables maybe useful in explaining the banks’ lending behaviour.

7)  The length for the assignment should be ~1,500 words (excluding tables and references).

8)  Do not COPY contents directly from sources.

Potential References (please search for further references)

•   Baum, C.F., Caglayan, M. and Xu, B., 2021. The impact of uncertainty on financial institutions: A cross‐country study. International Journal of Finance & Economics, 26(3), pp.3719-3739.

•   Caglayan,    M.,    and    Xu,    B.    (2016).    Sentiment    volatility    and    bank    lending behavior. International Review of Financial Analysis, 45:107-120.

•   Ferri, G., Kalmi, P., and Kerola, E. (2014). Does bank ownership affect lending behavior? evidence from the Euro area. Journal of Banking & Finance, 48:194–209.

•   Ivashina, V., and Scharfstein, D. (2010). Bank lending during the financial crisis of 2008. Journal of Financial Economics, 97(3):319–338.

Table 1. Variable definitions.