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Tuesday, July 11, 2006

What Does A Finance Professor Do All Day? - Part 2 (Research)

In my previous post, I talked about teaching for a finance professor. This one covers the "research" side of the job.

First, let me start by explaining what research actually entails. The following description is based on research from a finance prof's perspective. It's probably similar for other business disciplines, and may be very different for others.

For empiricists like myself, a research project always starts with a question, like "how does the makeup of the board affect a firm's performance?", or "do firms back date their options?" The next step is to gather some data, run a number of statistical tests, write up the results, and then send the paper off to a journal. The whole process can be pretty time consuming, since you often don't know what you'll need to do until you're in the thick of it (new research is, by definition, untrod territory).

While it sounds pretty technical (and it can be), at it's heart, a research study is just a story about how something in the field of finance works. In a well written piece, everything points towards the story that the author is trying to tell. In fact you can look at the tables of statistical results as being part of the story. To do this well can take quite a bit of work. One of the pieces I worked on went through about twenty rewrites before we got it just the way we wanted. I'd have to say that the multiple rewrites where you're trying to find just the right way to express something are probably the most difficult parts of the process, but when it works, it's pretty gratifying. With all this, it's not uncommon for a study to take over a year from the inital idea until there's a finished manuscript.

At this point, the manuscrpit is sent off to a "refereed" journal. To this point, the article is under your control. Once it's sent out, you start answering to other people. Once the article is received by the journal, the editor of the journal sends it out to one or more reviewers (called "referees") who either accept it on the spot (which almost never happens), tell the author that it's worthless and to go away (like the French Knights in Monty Python), or give the author a list of concerns to address and questions to answer, and a chance to revise it and resubmit it (note- it's not uncommon for it to take a couple of months to get a review back from a journal, since referees (present company included) are known to take their time in writing reports).

If you're lucky enough to receive a "revise and resubmit", you try to address any concerns the referee and/or editor have (this can take anywhere from a few weeks to a couple of months) and then resubmit the now revised version to the same journal (at which time it goes back to the referees for either an acceptance, a rejection, or another revise and resubmit). This can go on for several rounds (I know of one at the Journal of Finance that went 5 rounds).

Often the paper is rejected (either up front or after several rounds) at the first journal you send it to. At this point you submit it to another journal, and so on. Between gathering data, analyzing it, polishing the writing, and dealing the (possibly) multiple rounds of referee comments at several journals, this entire process can take quite some time. It's not uncommon for a couple of years to go by between the time a project is started and the time it's eventually published. In fact, a colleague just told me she got a piece published that she started in 1990, and had sent to 6 different journals over the years. Now THAT's determination.

In order to get tenure, an assistant professor has to publish a certain number of articles in refereed journals whether he's at a teaching or research school. The general rule seems to be that you need somewhere between 4 and 7 publications in 5-6 years years at "acceptable" journals to get tenure. The big difference between teaching and research schools is the quality of journals you must publish in to get tenure.

In the field of finance, most would agree that the top journals include the Journal of Finance, The Journal of Financial Economics, the Review of Financial Studies, and (although there's some disagreement on this one), the Journal of Financial and Quantitative Analysis. These journals generally have acceptance rates that are significantly less than 10%.

To get tenure at a research school, you pretty much have to have a top-tier publication (and often, several). At lower tier schools, it's often possible to get tenure without a top tier publication, but even some teaching schools require a top-tier publication for tenure.

In my previous post about teaching, I mentioned that if all I had to do was teach, it's be a pretty easy gig. But from what I've seen, assistant professors at research schools all work pretty long hours. Because of the long lead time required to get a piece through the reviewing process, to get 4-6 publications in respectable journals in 5 years usually means completing 10 or more studies in their first 4 years. So, most new research school faculty spend a good 50+ hours a week working (and in many cases, 60-70+ hours). This usually eases off significantly after the first few years, but one of my advisors told me that the worst job he knew was being an untenured assistant professor at a research school.

He also said that the BEST job in the world was being a tenured full professor at a research school, but that's a topic for another day.

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