How can business school students benefit from applied research in finance?
Fiona Huang and Giovanni Zaccardi, both Master in Management, Financial Economics (MIM FE) international students took part in a hands-on research experience through the new Innovations in Investment Management elective, offering them a two-month placement in the school’s renowned research lab, EDHEC-Risk Institute and exposed them to different facets of investment management. They tell us about it.
WHERE ARE YOU FROM? WHAT UNIVERSITY? WHAT’S YOUR FIELD OF STUDY?
Fiona Huang: I am from Taiwan, but I used to study in China and Italy. I study finance.
Giovanni Zaccardi: I am from Pisa, Italy. Prior to joining EDHEC, I studied at the University of Bologna where I earned a Bachelor's Degree in Economics and Finance.
WHY YOU CHOSE EDHEC? WHAT TRACK ARE YOU IN AT EDHEC?
FH: I am currently doing the MiM FE track, and I chose EDHEC because it has a strong reputation in smart beta and close collaboration with many financial industry leaders in various research projects.
GZ: I have joined EDHEC in September 2018 to attend the Financial Economics track. I have chosen EDHEC for one main reason. I thought that the structure of the MiM in Financial Economics, with a first year to strengthen core knowledge, a professional immersion year to gain relevant working experience and a final year to specialise would allow me to gain the best perspective over the finance industry and gain the most in terms of personal development. It is now more than a year since I made this choice and I can confirm that it was the best one for me.
YOU TOOK PART IN AN APPLIED RESEARCH PROJECT INVOLVING EDHEC-RISK INSTITUTE. CAN YOU TELL US ABOUT IT?
GZ: The idea is to cover topics and fields that are currently at the center of the research in the industry with a very practical and hands-on approach. I knew about EDHEC's Risk-Institute, but I never thought I could be directly involved in it. At the beginning of the course, Professor Lionel Martellini gave us an overview of the activities in which EDHEC-Risk Institute is involved, illustrating the main challenges that the finance industry is facing. This provided us with a clear view of the aims of our projects, which are part of EDHEC-Risk-Institute major researches. We were assigned to specific group projects on the basis of our preferences and skills. Each group project was coordinated by a Researcher at EDHEC-Risk Institute. We immediately received the guidelines for our work and started discussing the approach and the methodologies to complete the tasks. The initial discussion was very open and it was possible to express our own insights, something I personally appreciated. In the classes that followed, each group presented the progress made, reporting its major insights. This system gave us exposure to what other teams were working on, scaling up the learning opportunities beyond our own projects.
FH: My topic was Sustainable investing. My team’s objective was to identify the environmental factor impact on default rate of sovereign and corporates, and we also wished to provide relevant information on how asset management companies can adopt sustainable investing into their fund management routine. We created a taxonomy based on common investment process, hoping to provide a unique prospective to how ESG can be integrated into asset allocation. But Giovanni says, the class is very much focused on individual projects, but it also allows you to learn from other groups’ research.
WERE YOU WORKING ON A PARTICULAR SUBJECT?
FH: I was leading the paper on taxonomy and industry trend analysis. I was also able to participate in other papers led by my colleagues in the same group, so I had some exposure to green bonds and environmental factor’s impact on default.
GZ: I was working into the Real Estate Investing project, which involved two tasks: writing a report about Reverse Mortgages (equivalent to the French viagers), with a focus on the opportunities for asset managers, and assessing the inflation hedging effectiveness of Real Estate investment vehicles with a focus on Pension Funds. It was very insightful. Our supervisor, Kévin Giron, a Quantitative Engineer at EDHEC-Risk Institute provided many insights regarding the asset class. The approach was very horizontal. This created a wonderful atmosphere and allowed us to develop a sense of ownership and responsibility towards the project.
WHAT IS THE MAIN TAKEAWAY FROM THIS COURSE?
FH: The course was very interactive, and often, students were the ones leading the discussion. Aside from all the technical results and research findings done by peers, the main takeaway is definitely the opportunity to improve one’s research skills in financial industry’s “hot topics”. To be able to work on something that I was passionate about while being guided on how to do academic research is a very valuable opportunity!
GZ: I think it gave us a broader understanding of what are the major innovations and the key challenges that will shape the future of finance. We had access to many learning opportunities, understanding the trends that are driving innovation across the industry. We could learn how to write and structure academic research, a skill that I believe will be useful in our future professional lives, as it required a good degree of analytical skills and critical thinking. The course provided us with many learning opportunities.
WHAT DO YOU THINK OF THIS ACADEMIC EXPERIENCE?
FH: The academic experience was something very different from other courses available at EDHEC and even other universities. It was focusing a lot on hands-on, practical experiences, and this way of learning helps me absorb new knowledge better and faster. Plus, it is interesting to discuss your research not only with a professor but with colleagues who are passionate about the same topic. You definitely get more ideas through debates and discussions, and you get to eventually be the “expert” in your project.
GZ: We had the opportunity to sharpen key skills that will help us succeed during both academic studies and internship experiences. In each project, we could apply programming, writing and reporting skills as well as teamwork. In addition, it was very insightful to network with members of EDHEC-Risk Institute and understand their point of view over the industry. It was also very challenging, as we applied complex problem-solving in empirical research. Finally, it required a good level of critical thinking to address the challenges involved in each project and to understand the innovations in which it was positioned.
I am very enthusiastic about it. We had the opportunity to learn a lot. I would recommend it to every student, whether they are interested in research or not: I believe the tasks, the teamwork and reporting activities, together with the horizontal structure, resembled a professional experience. I am convinced that by attending it, students can not only directly interact with problems at the frontier of applied research in finance, but also test their work-ethic in a demanding and rewarding environment.
HOW HAS THIS EXPERIENCE CHANGED THE WAY YOU SEE RESEARCH APPLIED TO FINANCE?
FH: I have always wanted to develop a career in investment research, but this experience makes me understand how academic research can contribute actively to the investment industry. ERI really is an influential leader in applied research, and it is great to know what you are doing in class could influence the decisions of future asset managers.
GZ: I think it’s a very dynamic activity. It involves working a lot with data and quantitative models. We learned the importance of programming languages. At the same time, many projects pushed us to think about the products/activities we researched also from a broader perspective. For instance, I was involved in the reverse mortgage research project. We researched the current and future trends in the market and what is driving the growth of the product, something that required to understand the broader pension funding gap and retirement planning challenges. Last but not least, each group had to think about the commercial applications of the designed investment solutions, something that fostered our business awareness. It was a very interesting and enriching experience.