Hey, Everyone! The Annotated Bibliographies are FINALLY done!!!!! Now its time to talk about research questions, and justifying them.
I narrowed down my research question a bit more from the outline from last week. Basically, I'm asking: Post IPO, which comparable firm multiples are most effective in valuing Social Media Firms on the Solactive Social Media Index, and does the Price-Earnings Effect still hold in this market?
Scope: I have narrowed my scope in multiple ways. The first means in which I have narrowed my scope is by looking specifically towards the Social Media Market, and social media firms following their IPOs, when they are first traded publicly. Since I can't look at every Social Media firm that has ever been traded on the stock market, since I would have no means for choosing firms, and because of the large number of them, I am looking towards the firms on the Solactive Social Media Index, which is essentially measures the value of Social Media stocks. This index, as according to one of my sources, is largely considered the most extensive and appropriate means of looking at Social Media firms. Ultimately, this specification allows me to spend more time researching the significant aspect of my area of inquiry since I do not have to spend time worrying about which Social Media Firms to look towards. The next specification in my scope is looking towards specific valuation models and stock market effects associated with it. I specifically look towards comparable firm multiples, which are essentially ways of assigning worth to a company relative to similar companies in the industry. Looking at this model and the Price-to-Earnings Effect gives my research more specificity, but also allows me flexibility in choosing models. The ambiguity of the "comparable firm models" is intentional since I cannot, right now, project how many models I will look at. This allows me to experiment with only a few or many models, depending on how long my research actually takes. Finally, the Price-Earnings Effect is used to act as an interesting and important addition, since the effect is fundamental in finance and deserves to be studied. Furthermore, there might be an instance in which the comparable models produce no significant information whatsoever, as one of my sources implies might be the case, so this source provides an extra outlet for my research.
Key Terms: I have quite a few key terms in my definition, all of which will be defined as they naturally appear in the literature review. The definitions that I use and discuss are commonplace in academic journals, so I can justify the validity of the definition through various professors that write about them. The first key term is IPO. This just stands for Initial Public Offering, and is just when a company first sells it stocks to the public, and begins to appear on the stock market. Thus post IPO is looking at the time after a firm goes public. The next key term is comparable firm multiples. As explained previously, in finance firms are valued to assess their worth using models. A Comparable firm multiple is a number associated with some aspect of a companies financial situation that is compared with numbers of the same multiple from other similar firms in the industry to see whether the company in question is worth more or less relative to the other firms analyzed. A financial index is essentially a measurement of the value of a specific industry, or section of the stock market. It contains firms highly representative of the industry of the index. Finally, the Price-Earnings effect is a financial phenomenon, where firms with a low stock price to finance Earnings-per-share ratio perform better than firms with a higher value of the same ratio.
Because my research is testing to see whether certain fundamental financial phenomenon and measurements appear in the Social Media market, my question only assumes that the comparable firm multiple can be applied to Social media markets. Even this, however, is a loose assumption as if I find that the results are insignificant, the conclusion of my study will be that the multiples cannot be applied to the Social Media market. Essentially, because my research tests whether certain assumptions are true in the first place in the Social Media market, no aspect of the question should rest on unsound logic.
Variables: The primary variables in my question, which I can adjust, are the comparable firm multiples that I ultimately decide to use to test my research question. Foreseeably, I may slightly modify my question to analyze choice firms in the index, and in this case, specific Social Media firms in the index to analyze in my research question would also be variables.
Researchability: I envision myself looking at the past data of the Social Media firms on the index and performing calculations using the comparable firm multiples to predict the future price or other financial variable of the firm, and comparing it to the actual value at a certain date. After calculating residuals and percent errors, I would be able to determine which multiple would statistically perform the best in the market. Following this, I envision myself analyzing the firm, similar to other researchers I have read, with the Price-Earnings ratio to determine if the Price-Earnings effect still applies within the Social Media Market.
Gap: The gap in my research is twofold: one, according to one of my sources, Social Media firms and their IPOs are substantially different from other firms and IPOs, making them a particularly interesting and important subject to study. Second, and more importantly, the Social Media market has not been analyzed AT ALL in modern finance research, and due to the increased success of these firms as well as their unique qualities, as explained before, there is a natural gap to research whether fundamental questions, such as the best way to value a firm, apply and can be answered in the Social Media market. Essentially, there has only been one finance paper on Social Media firms, describing their characteristics and relative performance. My research, as I explained earlier, begins to test whether as analysts, we can make assumptions about the Social Media market like we do of other different industries.
Significance: Firstly, Social Media is growing in popularity and size, so it is already important to look at what makes a Social Media firm successful for a prospective modern investor. Taking a more nuanced approached, I am looking at Social Media IPOs, and determining whether early on, a multiple can value the firm accurately. In the modern day, IPOs are of increasing relevance due to the increasing number of startups wanting to perform IPOs to gain more funds. Thus, the research into Social Media IPOs gives insight into valuing young, growing IPOs in the modern world.
OMG. I'm so sorry for that SUPER LONG POST, but I had a lot to say. (1,113)
Akash
I narrowed down my research question a bit more from the outline from last week. Basically, I'm asking: Post IPO, which comparable firm multiples are most effective in valuing Social Media Firms on the Solactive Social Media Index, and does the Price-Earnings Effect still hold in this market?
Scope: I have narrowed my scope in multiple ways. The first means in which I have narrowed my scope is by looking specifically towards the Social Media Market, and social media firms following their IPOs, when they are first traded publicly. Since I can't look at every Social Media firm that has ever been traded on the stock market, since I would have no means for choosing firms, and because of the large number of them, I am looking towards the firms on the Solactive Social Media Index, which is essentially measures the value of Social Media stocks. This index, as according to one of my sources, is largely considered the most extensive and appropriate means of looking at Social Media firms. Ultimately, this specification allows me to spend more time researching the significant aspect of my area of inquiry since I do not have to spend time worrying about which Social Media Firms to look towards. The next specification in my scope is looking towards specific valuation models and stock market effects associated with it. I specifically look towards comparable firm multiples, which are essentially ways of assigning worth to a company relative to similar companies in the industry. Looking at this model and the Price-to-Earnings Effect gives my research more specificity, but also allows me flexibility in choosing models. The ambiguity of the "comparable firm models" is intentional since I cannot, right now, project how many models I will look at. This allows me to experiment with only a few or many models, depending on how long my research actually takes. Finally, the Price-Earnings Effect is used to act as an interesting and important addition, since the effect is fundamental in finance and deserves to be studied. Furthermore, there might be an instance in which the comparable models produce no significant information whatsoever, as one of my sources implies might be the case, so this source provides an extra outlet for my research.
Key Terms: I have quite a few key terms in my definition, all of which will be defined as they naturally appear in the literature review. The definitions that I use and discuss are commonplace in academic journals, so I can justify the validity of the definition through various professors that write about them. The first key term is IPO. This just stands for Initial Public Offering, and is just when a company first sells it stocks to the public, and begins to appear on the stock market. Thus post IPO is looking at the time after a firm goes public. The next key term is comparable firm multiples. As explained previously, in finance firms are valued to assess their worth using models. A Comparable firm multiple is a number associated with some aspect of a companies financial situation that is compared with numbers of the same multiple from other similar firms in the industry to see whether the company in question is worth more or less relative to the other firms analyzed. A financial index is essentially a measurement of the value of a specific industry, or section of the stock market. It contains firms highly representative of the industry of the index. Finally, the Price-Earnings effect is a financial phenomenon, where firms with a low stock price to finance Earnings-per-share ratio perform better than firms with a higher value of the same ratio.
Because my research is testing to see whether certain fundamental financial phenomenon and measurements appear in the Social Media market, my question only assumes that the comparable firm multiple can be applied to Social media markets. Even this, however, is a loose assumption as if I find that the results are insignificant, the conclusion of my study will be that the multiples cannot be applied to the Social Media market. Essentially, because my research tests whether certain assumptions are true in the first place in the Social Media market, no aspect of the question should rest on unsound logic.
Variables: The primary variables in my question, which I can adjust, are the comparable firm multiples that I ultimately decide to use to test my research question. Foreseeably, I may slightly modify my question to analyze choice firms in the index, and in this case, specific Social Media firms in the index to analyze in my research question would also be variables.
Researchability: I envision myself looking at the past data of the Social Media firms on the index and performing calculations using the comparable firm multiples to predict the future price or other financial variable of the firm, and comparing it to the actual value at a certain date. After calculating residuals and percent errors, I would be able to determine which multiple would statistically perform the best in the market. Following this, I envision myself analyzing the firm, similar to other researchers I have read, with the Price-Earnings ratio to determine if the Price-Earnings effect still applies within the Social Media Market.
Gap: The gap in my research is twofold: one, according to one of my sources, Social Media firms and their IPOs are substantially different from other firms and IPOs, making them a particularly interesting and important subject to study. Second, and more importantly, the Social Media market has not been analyzed AT ALL in modern finance research, and due to the increased success of these firms as well as their unique qualities, as explained before, there is a natural gap to research whether fundamental questions, such as the best way to value a firm, apply and can be answered in the Social Media market. Essentially, there has only been one finance paper on Social Media firms, describing their characteristics and relative performance. My research, as I explained earlier, begins to test whether as analysts, we can make assumptions about the Social Media market like we do of other different industries.
Significance: Firstly, Social Media is growing in popularity and size, so it is already important to look at what makes a Social Media firm successful for a prospective modern investor. Taking a more nuanced approached, I am looking at Social Media IPOs, and determining whether early on, a multiple can value the firm accurately. In the modern day, IPOs are of increasing relevance due to the increasing number of startups wanting to perform IPOs to gain more funds. Thus, the research into Social Media IPOs gives insight into valuing young, growing IPOs in the modern world.
OMG. I'm so sorry for that SUPER LONG POST, but I had a lot to say. (1,113)
Akash
Akash,
ReplyDeleteI think you did a great job and pretty much addressed all parts of the question in your explanation. I am still a little confused about the Solactive Social Media Index. Is it just a group of social media firms that are valued based off each other? Because that is what I took it to be from reading your post. I think overall you need to make sure to do a good job defining all your terms in a way that is understandable for the average reader, but I'm sure you will do that in your lit review. Overall, I think you have a good question that seems very researchable and significant. I can't wait to see what you end up with as your results.
AKASH
ReplyDeleteso when i first read your question i was like….wth is happening…..the only word i understand is “effective”….. but your definitions are pretty good and i actually understood most what you were saying after i read them. I’m still confused on the the price earnings effect. like i get the definition i think but i don't really get like why that effect is the way it is…..just btw so you expand on it more in your lit review bc it was kinda confusing.
also im still confused about the Solactive Social Media Index thing…..what firms are in the index…and i still don't get how you're going to use it. i mean you explained everything extensively but since i didn't get what that index was it was kind of hard to follow.
like max said i think you need to work on making it understandable but overall i think your project sounds super cool and i think you're going to do a great job with it !!
Post IPO, which comparable firm multiples are most effective in valuing Facebook, Twitter, and LinkedIn, Social Media firms on the Solactive Social Media Index, and does the Price-Earnings Effect still hold in this market?
ReplyDeleteUpon investigating the Solactive Social Media Index, I found that companies such as Groupon and Google were part of the index, so I want to isolate my search to actual "Social" Social Media firms with revenue models based on online interaction between individuals in their user-base.
Okay, so did I ask for research question or questions? Because I'm pretty sure I asked for a research question, but there are TWO questions in yours. Yes, I'm being unnecessarily sassy, but the point is you need to consolidate and synthesize your question in a way so that it is only one question.
DeleteAlso, I'm confused about the Solactive Social Media Index, as is everyone else. I don't understand how you'll even use it if it doesn't exclusively deal with social media. Elaborate, please.
Specific Firms: Facebook, LinkedIn, Twitter, Yelp
ReplyDelete