An Overview of the Discipline

Finance is the study of how people and companies obtain and use their capital and what factors influence their decisions. Finance focuses on how individual investors and firms manage their funds in the face of a constantly-changing business environment.

Subdisciplines include:

• Banking Regulation
• Financial Economics
• Venture Capital
• International Banking
• Behavioral Finance
• Executive Compensation
• Corporate Governance
• Corporate Valuation
• Investment Management
• Asset-Pricing
• Real Estate
• Fixed Income Securities
• Private Equity

Writing in the Discipline

Goal

The goal of finance is to create the best possible approximations for market behaviors.

The discipline of finance:

• Analyzes the banking sector and its impact in the global economic environment
• Creates the best possible approximations of the world’s credit and equity markets
• Explains current and past phenomenon and causes, offering corporate resolutions to these issues
• Predicts future occurrences (such as asset price movements and the tendency for stock prices to be driven by macroeconomic events)

Note that all subdisciplines work together to establish a comprehensive model that can explain and predict market behavior with minimal error.

Authorship

Writing in finance can be either single-authored or co-authored.

Professor Richard Herring observes, "Research can be conducted in either collaboratively or individually depending on preferences of the researcher and the nature of the project. I personally like collaborating - it is stimulating to work with others who approach financial topics in different ways. Writing is an opportunity to learn."

Claims

Financial research usually involves identifying a problem or area of interest and exploring it, with the aim of finding a potential resolution. While empirically based, the discipline also depends on a set of reasonable assumptions.

Professor Jessica Wachter notes, "My goal in a research paper is usually to explain some aspect of various data that was previously mysterious or unexplored."

Professor Herring, in turn, observes, "I try to raise the level of public discussion and debate on numerous policy issues that are addressed in my research by presenting new evidence or a new way of analyzing the problem."

Reasoning and Evidence

The discipline of finance bases its reasoning predominantly on quantitative data. Mathematical reasoning is crucial in this field.

Explanatory vs. Justificatory

While academic writing in finance is generally explanatory, professional writing in finance leans towards the justificatory end of the spectrum.

Academic writing: scholarly articles

• Generally use explanatory reasoning
• Are mostly based on empirical data or past research
• Explain how evidence is consistent with a hypothesis
• Require mathematical proofs, even if proposing a new theory

Professional writing

• Editorial articles, litigation consulting documents, mergers and acquisitions (M&A) deal proposals, and asset pricing models
• Generally use justificatory reasoning

Types of Evidence

Empirical Evidence (data-based) is used for:

• Statistical Analyses
• Natural Experiments

Theoretical Evidence (text-based) is used for:

• Mathematical Proofs
• Proposed Financial Models

Professor Wachter explains, "My research is neither strictly data-based nor text-based, but rather model-based with a data component. We use evidence to show whether a proposed model can account for statistical measures. These measures are calculated empirically using data provided by Wharton Research Data Services (WRDS)."

Professor Allen observes that "good empirical data is always regarded as legitimate while theoretical calculations receive more scrutiny."

For more information see: Wharton Research Data Services (WRDS)

Writing Tips

The Writing Process

The writing process usually begins with the observation of some phenomenon that leads to the development of a hypothesis. This observation typically comes as the result of extensive reading by the researcher. Once the hypothesis is established with sufficient quantitative data to support it, the write-up can begin. Articles undergo at least three to five drafts, with more drafts common when an article covers extensive mathematical proofs requiring constant revision.

Common Errors

The most serious mistake students make is to provide inadequate evidence to support their propositions. Another common and substantial error is the failure to articulate ideas clearly.

"Students in the field typically have strong analytical skills but need improvement in their communication and writing abilities," says Professor Richard Herring.

Of secondary importance are errors in spelling, grammar, coherence, and differentiating between active and passive verbs.

Style

Articles in the discipline typically follow the style of the Journal of Finance. Professor Richard Herring recommends that students use the Chicago Style Manual to strengthen their understanding of the use of active and passive voice.

Genre

Student Assignments

In his International Banking course, Professor Richard Herring requires students find a recent news article that addresses a topic raised in lecture. Students then write two paragraphs elaborating the connection and take a position on the topic, combining explanatory and justificatory reasoning. The brevity of the assignment encourages concision and provides practice for students in communicating analysis and evaluation in their writing on financial topics.

Professors may also assign case studies. Case study analysis is written in narrative form and employs justificatory reasoning. Its proposition proposes a solution selected from various alternatives. The emphasis throughout is on clear, concise writing: active verbs, clarity of ideas, problem definition, and recommendation.

Professor Herring notes, "I assume that most of my students are going into some sort of business, and while I hope that some will do research, I want to ensure that they can write a good financial memo at the very least. The skills that are required for this involve concision, persuasion, and the ability to stick to and defend a position."

Professional Writing

Click on the professor links to view examples of professional writing in this discipline.

© 2013 The University of Pennsylvania

Meet the Professors

Dr. Richard J Herring

Richard Herring is the Jacob Safra Professor of International Banking and a Professor of Finance at the Wharton School. He received his A.B. from Oberlin College and his M.A. and Ph.D. from Princeton University. More...

Dr. Jessica A Wachter

Jessica Wachter is a Professor of Finance at the Wharton School. She received her A.B. and Ph.D. from Harvard University and previously served at the Stern School of Business at New York University. Dr. Wachter specializes in financial economics and has worked on projects ranging from long-horizon equity to consumption-based interest term models. More...

Dr. Franklin Allen

Franklin Allen is the Nippon Life Professor of Finance at the Wharton School. He received his M.Phil. and D.Phil. from the University of Oxford. His research interests include the areas of corporate finance, asset pricing, and economics of information. More...