Project Requirement and Possible Project Topics

 

 

 

Project requirement

 

Topic: Any topic is fine. This analytical theory of investment is a general theory and can be applied to broad range of problems.

 

Grading: If you gain deep insight from working on the project and others gain fresh ideas from your presentation, rest assured that you will have very high scores.

 

 

Possible project topics

 

 

  1. Longevity, fertility and sustainability: In the class, we have shown that when the duration of a project is over extended, its return will be low. Currently, life span is very long in wealthy countries. At the same time, fertility rates have dropped below replacement rate, which makes the society unsustainable. Perform a statistical study on the relation between longevity and fertility among countries with similar living standards. This is the same for living organisms. On the cellular level, our body gets damaged and repaired everyday. When we get older and older, the cost of repairing body outweighs the cost of raising new children. Economic principle determines that animals don’t survive forever. What is the implication of this study on policy of health care system? Should longevity be a  major measure of national welfare? When fertility is already below replacement rate, should we continuously fund health research and care on senior on a massive scale while neglecting the welfare of young families?

 

 

2. Fixed cost and human mind: Women and men have different cost structure in reproduction and raising kids. Women have considerably higher fixed cost. What differences in mind between women and men can be attributed to differences in fixed costs.

 

 

3. Entrepreneurship and background of people: It is often outsiders, despite being less resourceful, become entrepreneurs. Why is that?

 

Reference

 

Chen, Jing and Tsvi Vinig, (2007) Entrepreneurship: An Analytical Thermodynamic Theory, Working paper. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=979858

 

Peter Shannon and Trevor Lipinski, (2006)  Entrepreneurs & the new economic theory, student project http://web.unbc.ca/~chenj/course/project/Entrepreneurs.doc

 

Stearns, L. and K. Allan, 1996. Economic Behavior in Institutional Environments: The     Corporate Merger Wave of the 1980s, American Sociological Review, 61, 699-           718. 

 

 

 

4. Presidential puzzle. Relation between efficiency and fairness. It is not a simple trade off. Other empirical examples?

 

The stock returns are higher under Democratic presidents indicates that economy is doing better unexpectedly. Why? From the conventional theory, the tradeoff between efficiency and equality. From our theory, efficiency depends very much on equality since equality reduces uncertainty. Since this is unexpected in conventional theory, the markets are surprised by the good performance of the economy.

 

Data from that paper indicates that small firms do better under democratic terms, which indicates Republicans are more pro big business.

 

Reference

 

Santa-Clara, Pedro and Rossen Valkanov, 2003, The presidential puzzle: Political cycles and the stock market. Journal of Finance, 58, 1841- 1872.

 

Chen, Jing, 2005, The Physical Foundation of Economics: An Analytical Thermodynamic theory, World Scientific, Singapore, Chapter 4.

 

 

5. K-r strategy, fertility and long term cycles. Stock performance is a reflection of economic performance. As we discussed, good economic performance raise living standard, which is also a cost to households. Rising cost forces families to reduce fertility, which eventually will drag down economy and hence stock markets. Several recent papers discussed this issue on US market. Since Japan has the lowest fertility rate among all countries, investigating Japanese demography, economy and stock market should reveal this pattern most clearly. Japan is a country with little natural resources. Its development relied on the hard working of its people. It is a system of extremely high fixed cost. As the fixed costs becomes higher and higher, it becomes more and more of a K system. In the end, its fertility rate dropped to the lowest in the world. After Nikkei index peaked near 40,000 points in 1989, its stock market dropped sharply to around 13,600 recently. Work on Japan and other developed countries to find the possible patterns.

 

Note: Living standard is a good approximation, but not identical to fixed cost of a society. In a country without natural resources, such as Japan, living standard is a good measure of fixed cost. But in other countries, such as Saudi Arabia, living standard is not highly related to human cost. How about Canada? The fertility according to regions, living standards.

 

Some references:

 

Robert Arnott and Anne Casscells: Demographics and Capital Market Returns, Financial Analyst Journal, p. 20-29, Vol. 59, No.2, March/April 2003.

 

Chen, Jing, 2005, The Physical Foundation of Economics: An Analytical Thermodynamic theory, World Scientific, Singapore, Chapter 5.

 

 

6. As knowledge economy becomes more and more important, when you graduate, you probably have a lot of opportunities in  managing projects that are related to software development. For example, banks are big users of IT technology. How to develop software systems becomes a major topic. The traditional view on software engineering is to lay out the plan clearly before development. However, recently, many people have advocated an agile methodology that deemphasize long term planning. What are the advantages and disadvantages of the different approaches? How should we decide to choose different methodologies for different kinds of tasks?

 

References:

 

Li Liu, Xiaoying Kong and Jing Chen, (2006)  An Economic Model of Software Development Approaches, Working paper, http://ausweb.scu.edu.au/aw06/papers/refereed/kong/paper.html

 

 

 

7. High fixed cost systems are more sensitive to the movement of underlying factors. For example, in the petroleum business, oil sand is a high cost way to extract oil. Theoretically, the value of companies related to oil sand businesses will jump up much higher than regular oil companies when oil prices go up. The following project provides empirical support for this prediction

 

Geoff Ruffle and Christine Harder, (2006) Oil price movement and stock price movement , http://web.unbc.ca/~chenj/course/project/oil.doc

 

Can you find more empirical results?

 

 

8. Intuitively, at the beginning of a cycle, small firms do best, then medium firms, and finally, large firms. Test it.

 

 

9. Generation gap. Why your parents are more conservative than you? We usually interpret it as a sign of social progress. It can be understood in a much simpler way, from the level of fixed assets. Adults have higher level of fixed assets and hence are more conservative. This is the same in the animal world. Cubs often play around and adults rarely play. Can this understanding provide new insights about animal behavior or human societies?

 

 

10. Fixed cost and competitive advantages.

 

Reference:

Cycles, Trends and Financial Crisis: Understanding the Impacts of Monetary Policies, working paper.

 

 

11. Republic or Empire. In our time, democracy seems to be self-evident to be superior to authoritarian states. The same was true at the early stage of Roman Republic. Yet history showed that public opinion shifted rapidly in several decades. Can we understand it with our model? If so, what can we think about our own future? 

 

 

12. Fixed cost and marriage system: Women have considerably higher fixed cost in producing and caring for kids in families than men. The current legal system assumes that man and woman are “equal”, which means that a woman has to work very hard outside family as well and a man can walk away from family responsibility easily. Taking biological factors into consideration, are “equal” relationship really equal? Investigate how relation between “equality” and fertility in a society.