Well, another week of AP Research has passed, and the task at hand seems as daunting, if not more so, as it did a week ago. This week, I spent time reading part of a book on valuation models, another article that is verifying the area are of research I want to go down more, and finding some other articles about possible industries that would be interesting to analyze. Taking some suggestion from Ved, I found that IPO's are a really promising industry to examine: a lot of conventional methods of valuing stocks break down, and modifications have to be made to existing them in order to apply them to IPO's.
Anyways, research crises aside, I need to begin partitioning my topic into subtopics for my literature review. At this point in time, the literature review seems like a thing I will use for narrowing down my research to a specific valuation model and for exploring areas in which my specific valuation model has never been applied in, or generally fails to account for. These give a few natural subtopics for me to talk about. The first, and most general, is just valuation models in general. In the future, and for the purpose of the literature review, I will discuss a single model, justify why it must be looked at, and proceed to investigate/ analyze areas in which it can be applied. For now, however, I must look at various valuation models holistically: what do they measure, what literature is on them, etc.. In the process of doing so, I can come to a more specific or academically "rich" model to examine. Currently, the model that I am looking at, and which I seem to be leaning towards is the Price/ Book Value valuation technique. Having done more research on this technique, it seems as though a gap in regards to how it can improve value premiums, similar to study I read by two researchers in 2005 who examined increasing the value premium for the price/earnings ratio. The next subtopic would be a general historical context for how different models has been applied when valuing stocks, and what modifications of the model have been applied to different scenarios. This has the great benefit of allowing me to focus on a particular scenario that the model has never been applied to, or a modification that has never been attempted for the stock. Attempting to find a way to modify a technique necessarily requires that it fail/ underperform in certain scenarios. This leads me to my third subtopic: documenting common scenarios/ conditions under which valuation techniques and models fail. This will aid me in further refining my research method, since I would have a better idea of where to begin modifying the technique that I would have chosen. Finally, every technique has to have a context, and be tested against certain data. Because of this, my final subtopic needs to be on industries in which the valuation method is not frequently used (if I want to introduce a new method/ improvement for applying the technique), or is frequently used (if I want to improve upon a pre-existing method). This is where Ved's suggestion comes into play. Frequently, IPO financial data previous to their initial offering date is not available. This means that many techniques fail, and need improvement when being applied to IPO's. My research, specifically, seems to be going down the route of improving Price/Book ratio in the valuation of IPO's. As I read more about how other models have been modified when being applied to IPO's, I'll be sure to amend my topic and research area. For now, I just have to keep reading. (616)
Cheers,
Akash
Anyways, research crises aside, I need to begin partitioning my topic into subtopics for my literature review. At this point in time, the literature review seems like a thing I will use for narrowing down my research to a specific valuation model and for exploring areas in which my specific valuation model has never been applied in, or generally fails to account for. These give a few natural subtopics for me to talk about. The first, and most general, is just valuation models in general. In the future, and for the purpose of the literature review, I will discuss a single model, justify why it must be looked at, and proceed to investigate/ analyze areas in which it can be applied. For now, however, I must look at various valuation models holistically: what do they measure, what literature is on them, etc.. In the process of doing so, I can come to a more specific or academically "rich" model to examine. Currently, the model that I am looking at, and which I seem to be leaning towards is the Price/ Book Value valuation technique. Having done more research on this technique, it seems as though a gap in regards to how it can improve value premiums, similar to study I read by two researchers in 2005 who examined increasing the value premium for the price/earnings ratio. The next subtopic would be a general historical context for how different models has been applied when valuing stocks, and what modifications of the model have been applied to different scenarios. This has the great benefit of allowing me to focus on a particular scenario that the model has never been applied to, or a modification that has never been attempted for the stock. Attempting to find a way to modify a technique necessarily requires that it fail/ underperform in certain scenarios. This leads me to my third subtopic: documenting common scenarios/ conditions under which valuation techniques and models fail. This will aid me in further refining my research method, since I would have a better idea of where to begin modifying the technique that I would have chosen. Finally, every technique has to have a context, and be tested against certain data. Because of this, my final subtopic needs to be on industries in which the valuation method is not frequently used (if I want to introduce a new method/ improvement for applying the technique), or is frequently used (if I want to improve upon a pre-existing method). This is where Ved's suggestion comes into play. Frequently, IPO financial data previous to their initial offering date is not available. This means that many techniques fail, and need improvement when being applied to IPO's. My research, specifically, seems to be going down the route of improving Price/Book ratio in the valuation of IPO's. As I read more about how other models have been modified when being applied to IPO's, I'll be sure to amend my topic and research area. For now, I just have to keep reading. (616)
Cheers,
Akash
Akash, your subtopics seem to be pretty intuitive and the organization of them seems thoughtful, I would just make sure that you can convey all of that information in a clear way, as it seems a little bit overwhelming to me right now. As in, how will you cohesively bring together all of the different subtopics?
ReplyDeleteMy only concern, and it is one echoed by some of your classmates, is how feasible is this for you to accomplish? Is this something that entire companies dedicate teams of people to doing? Let me know what you're thinking in terms of feasibility.
Akash, I'm really glad that you found a way to narrow down your topic a little! I loved the alliteration in your title but, really, your subtopics aren't subpar. The one thing I'm really struggling with is what Mrs. Haag mentioned. Each of your subtopics are complex and could become papers on their own. I know that you mentioned that you still have a lot of reading/narrowing down to do, but are you going to have enough time to solidify everything? I'm definitely not trying to discourage you, but you might want to narrow down your search even more. I think you're on to something really interesting, so don't give up!
ReplyDeleteSo first of all, give yourself credit where it's due because I can pretty much guarantee that no aspect of your paper will be subpar. Also, I really admire that you already have some of the steps planned out in actually going online and doing the reading and research. It seems like you have a process you're going to follow and I think that puts you in a really good place at this point.
ReplyDeleteSo I'm going to second Mrs. Haag in saying that your subtopics seem logical, but you are going to have to narrow things down a lot still. In the post, you said you were going to try these valuation models that you're going to develop in different situations and circumstances - do you have any ideas for what those situations or circumstances are going to be?
Overall, you sound really enthusiastic about this project and it seems to be something that will genuinely hold your interest for the rest of the year. Keep going, bro!
Look at specific industry IPO's, and which comparable firm approach is best. Try to find improvements to this if time allows.
ReplyDelete