1. Research Methodology in Finance
1.Introduction to Research Methodology
Lecturer: Dr. Thakshila Adikaram
2. 1. Introduction
Areas to be discussed:
Meaning of Research
Objectives of Research
Motivation in Research
Types of Research
Philosophy of research
Research Approaches
Significance of Research
Research Methods versus Methodology
Research and Scientific Method
Importance of Knowing How Research is Done Research Process
Criteria of Good Research
3. Meaning of Research
• Re + Search
• Re means (once more, afresh, anew) OR (back; with return
to a previous state)
• Search means (look thorough or go over thoroughly to look
something) OR (examine to find anything hidden)
4. What is Research?
• A careful consideration of study regarding a particular
concern or problem using scientific methods.
• According to the American sociologist Earl Robert Babbie,
“Research is a systematic inquiry to describe, explain,
predict, and control the observed phenomenon. Research
involves inductive and deductive methods.”
5. What is Research?
•“Organized, systematic, data-based, critical,
objective, scientific inquiry or investigation into a
specific problem, undertaken with the purpose
or finding answers or solution to it.”
Uma Sekaran
6. Objectives of Research
There are three objectives of research:
• Exploratory: As the name suggests, exploratory research is conducted to
explore a group of questions. The answers and analytics may not offer a
final conclusion to the perceived problem. It is conducted to handle new
problem areas which haven’t been explored before. This exploratory
process lays the foundation for more conclusive research and data
collection.
• Descriptive: focuses on expanding knowledge on current issues through a
process of data collection. Descriptive studies are used to describe the
behavior of a sample population. In a descriptive study, only one variable is
required to conduct the study. The three main purposes of descriptive
research are describing, explaining, and validating the findings.
• Explanatory: Explanatory research or causal research is conducted to
understand the impact of certain changes in existing standard procedures.
Conducting experiments is the most popular form of casual research. For
example, a study conducted to understand the effect of rebranding on
customer loyalty.
7. Exploratory
Research
Descriptive
Research
Explanatory
Research
Research
approach used
Unstructured Structured Highly structured
Research
conducted
through
Asking research
questions
Asking research
questions
By using research
hypotheses.
When is it
conducted?
Early stages of
decision making
Later stages of
decision making
Later stages of
decision making
To understand the characteristic of research design using research
purpose here is a comparative analysis:
Objectives of Research
8. Objectives of Research
• The objective of research is to discover answers through the
application of scientific procedure.
Research is conducted with a purpose to understand:
• What do organizations or (financial) institutes really want to find out?
• What are the processes that need to be followed to chase the idea?
• What are the arguments that need to be built around a concept?
• What is the evidence that will be required for people to believe in the
idea or concept?
9. 1.A systematic approach must be followed for accurate data. Rules and procedures are an integral part of the
process that set the objective. Researchers need to practice ethics and a code of conduct while making
observations or drawing conclusions.
2.Research is based on logical reasoning and involves both inductive and deductive methods.
3.The data or knowledge that is derived is in real time from actual observations in natural settings.
4.There is an in-depth analysis of all data collected so that there are no differences associated with it.
5.Research creates a path for generating new questions. Existing data helps create more opportunities for research.
6.Research is analytical in nature. It makes use of all the available data so that there is no doubt in inference.
7.Accuracy is one of the most important aspects of research. The information that is obtained should be accurate
and true to its nature. For example, laboratories provide a controlled environment to collect data. Accuracy is
measured in the instruments used, the calibrations of instruments or tools, and the final result of the experiment.
Characteristics of research
10. Motivation in Research
What makes people to undertake research? This is a question of fundamental
importance. The possible motives for doing research may be either one or more of
the following:
• Desire to get a research degree along with its consequential benefits;
• Desire to face the challenge in solving the unsolved problems, i.e., concern over
practical problems initiates research;
• Desire to get intellectual joy of doing some creative work;
• Desire to be of service to society;
• Desire to get respectability.
• However, this is not an exhaustive list of factors motivating people to undertake
research studies. Many more factors such as directives of government, employment
conditions, curiosity about new things, desire to understand causal relationships,
social thinking and emerging, and the like may as well motivate (or at times
compel) people to perform research operations.
11. Types of research
• Descriptive Research
• Comparative Research
• Analytical Research / Correlation research
• Applied Research
• Basic / Pure/ Fundamental Research
• Empirical Research
• Exploratory Research/ Formulative Research
• Historical Research
• Longitudinal Research
• Cross-sectional Research
12. Descriptive Research
• A fact finding investigation which is aimed at describing the
characteristics of individual, situation or a group (or) describing the
state of affairs as it exists at present.
• E.g. A bank manager wants to have a profile of the individuals who
have loan payments outstanding for 6 months and more. It would
include details of their average age, earnings, nature of occupation,
full- time /part-time employment status etc. This might help him to
extract further information or decide right away on the types of
individuals who should be made ineligible for loans in the future.
13. Comparative Research
• This is commonly applied in cross-cultural and cross- national
contexts.
• It is also applicable to different organizations or contexts. ( E.g. Firms,
labour markets etc.)
• Good for theory building.
14. Analytical Research / Correlation research
• Primarily concerned with testing hypothesis and specifying and
interpreting relationships, by analyzing the facts or information
already available.
• E.g: Assessing the Impact of financial literacy on Performance of
financial inclusion
15. Applied Research
• Research done with the intention of applying the results of the
findings to solve specific problems currently being experienced in
the organization.
• E.g.: A particular financial service may not be demanding well and the
manager might want to find the reasons for this in order to take
corrective action.
16. Basic / Pure/ Fundamental Research
• Research done in order to generate a body of
knowledge by trying to understand how certain
problems that occur in organizations can be solved.
• It is undertaken for the sake of knowledge without
any intention to apply it in practice.
• E.g.: A university Professor may be interested in investigating
the factors that contribute to absenteeism as a matter of little
academic interest.
17. Empirical Research
• A data based research which depends on experience or observation
alone. It is aimed at coming up with conclusions without due regard
for system and theory.
• E.g.: Empirical Research on Consumer Behavior towards shares in
share Market in Sri Lanka.
18. Exploratory Research/ Formulative Research
• It is the preliminary study of an unfamiliar problem, about which the
researcher has little or no knowledge. It is aimed to gain familiarity
with the problem, to generate new ideas or to make a precise
formulation of the problem.
• E.g. Pilot survey among Key Informants to identify the scope of study.
19. Historical Research
• It is the study of past records and other information sources, with a
view to find the origin and development of a phenomenon and to
discover the trends in the past, in order to understand the present
and to anticipate the future.
• E.g. Studying the advertisements of news papers during last few
decades to understand the evolution of e-commerce.
20. Longitudinal Research
Research carried out longitudinally involves data collection at multiple
points in time. Longitudinal studies may take the form of:
• Trend study- looks at population characteristics over time, e.g.
organizational absenteeism rates during the course of a year
• Cohort/group study- traces a sub-population over time, e.g.
absenteeism rates for the sales department;
• Panel study- traces the same sample over time, e.g. graduate
career tracks over the period 2000 – 2019 for the same starting
cohort.
21. Cross-sectional Research
One-shot or cross-sectional studies are those in which data is gathered
once, during a period of days, weeks or months. Many cross-sectional
studies are exploratory or descriptive in purpose. They are designed to
look at how things are now, without any sense of whether there is a
history or trend at work.
22. Academic research
• Academic research is scholarly or scientific investigation or
inquiry
• Main features of scientific research
1.Purposiveness - Should start the research with a definite
aim or purpose.
2.Rigor - Research should involve in a good theoretical
base and a carefully thought-out methodology
23. Main features of scientific research
3.Testability - Leads to test logically developed
hypotheses/assumptions.
4.Replicability - The results of the tests of the hypotheses
should be supported again and yet again when the same type of
research is repeated in other similar circumstances.
5.Precision - Closeness of the findings to reality based on a
sample.
6.Confidence - Probability that one’s estimations are correct.
24. Main features of scientific research
7.Generalizability - The scope of applicability of the research findings in
one organizational setting to other settings.
8.Parsimony - Simplicity in explaining the phenomena or problems that
occur. In other words, ability to explain the variance using less number
of variables.
26. Philosophies of the Research
• Nobody really knows how we can best understand the world
• Philosophers have been arguing about it for 1000s of years,
• For us, as researchers, need to consider how we know about the
world around us. What is our philosophical approach to knowledge?
27.
28. Ontology, Epistemology and Methodology
• Ontology: To do with our assumptions about how the world is made up
and the nature of things
• Epistemology: To do with our beliefs about how one might discover
knowledge about the world
• Methodology: To do with the tools and techniques of research
• Relationship of the three: Epistemological and ontological positions
should have some bearing on the methods that you select for your
research
29. Ontology
• Ontology comes from the Greek words
onto which means something that exists,
and logos which means logical knowledge.
• Researchers philosophical assumptions
about the nature of reality.
• The question of “what reality is like, the
basic elements it contains” (Silverman,
2010)
30. Ontology
• Ontology is the starting point of all research, after which one’s
epistemological and methodological positions logically follow. A
dictionary definition of the term may describe it as the image of social
reality upon which a theory is based.
• It has two opposite points such as Objectivism and Constructivism.
31. Epistemology
• A Researcher’s Epistemology is a result of his/her
Ontological Position
• His/Her Assumptions about the Best Ways of
Inquiring into the Nature of the World and
Establishing ‘Truth’.
• Positivism and interpretivism are two extreme
mutually exclusive paradigms about the nature and
sources of knowledge.
• Pragmatism- Mix approch
32. The Main Epistemological Positions in Management
Research
• Positivism: The Researcher as Scientist
• The Natural Sciences as a Model
• The Quest/aim for Objective Knowledge
• A Deductive or Theory-Testing Approach
• Interpretivism: Researcher as Detective
• Arises from a Critique of Using the Natural Sciences as a Model for Social
Research
• The Quest/aim for Subjective Knowledge
• An Inductive or Theory-Building Approach
33. The main epistemological positions in
management research
• positivism: the
researcher as scientist
• the natural sciences as
a model
• the quest/aim for
objective knowledge
• a deductive or theory-
testing approach
Interpretivism:
researcher as detective
arises from a critique of
using the natural sciences as
a model for social research
the quest/aim for subjective
knowledge
an inductive or theory-
building approach
34. Inferential Approach Meaning
There are two major branches of statistics
1.Descriptive
2.Inferential
• Descriptive statistics
Measures
1.Central tendency
(mean/mode/median)
2.Dispersion(range/varian
ce/standard deviation)
3.Data distribution
(skewness/kurtosis/
4.Normal
data(normality/outliers)
1.Frequency
2.Percentage
35. Inferential Approach Meaning
2.Inferential -this usually means survey research where a sample of
population is studied (questioned or observed) to determine its
characteristics, and it is then inferred that the population has the same
characteristics. Here the sample used to generalized the results for the
population.
• Inference can conduct through
1.Estimate parameters-can do parametric test but only for the normally
distributed data.
Eg; for parametric tests: One way Anova, paired t-test, liner regression
2.Hypothesis testing
37. Research Approach
There are two main research approaches
1. Induction (Empiricist’s approach)
2. Deduction(Rationalist's approach)
38. Deduction Induction
Logic In a deductive inference,
when the premises are
true, the conclusion must also be
true
In an inductive inference,
known premises are used
to generate untested conclusions
Generalizability Generalising from the general to the
specific
Generalising from the specific to the
general
Use of data Data collection is used to
evaluate propositions or
hypotheses related to an existing
theory
Data collection is used to
explore a phenomenon,
identify themes and
patterns and create a conceptual
framework
Theory Theory falsification or verification Theory generation and building
40. Inductive method
•Process where we observe certain
phenomena and on this basis arrive at
conclusions.
•“ Bottom- up approach”
•Going from specific to general
41. Inductive method
• Induction emphasis
• Gaining an understanding of the meanings humans attach to
events
• A close understanding of the research context
• The collection of qualitative data
• A more flexible structure to permit changes of research emphasis
as the research progresses
• A realization that the researcher is part of the research process
• Less concern with the need to generalize
42. Deductive method
•Top- down approach
•The process by which we arrive at a reasoned
conclusion by logical generalization of a
known fact.
•Going from general to specific
43. Deductive method
• Deduction emphasis
• Scientific principles
• moving from theory to data
• The need to explain causal relationships between variables
• the collection of quantitative data
• the application of controls to ensure validity of data
• the operationalisation of concepts to ensure clarity of definition
• A highly structured approach
• researcher independence of what is being researched
• the necessity to select samples of sufficient size in order to
generalise
45. Methodological Choice(Research strategy)
•Qualitative research
A non-quantitative type of analysis which is aimed at finding
out the quality of a particular phenomenon.
•Quantitative research
Employed for measuring the quantity or amount of a particular
phenomena by the use of statistical analysis.
•Mixed method research- Triangulation
Incorporates elements of both qualitative and quantitative
46. Qualitative research
•Findings tend to be subjective.
•Main research method consists of depth
interviews, focus groups, and projective
techniques(indirect questions).
•Administered by highly trained
interviewer-analysts.
•Small sample sizes.
47. Qualitative research
• The following are the methods used for qualitative research:
• One-to-one interview
• Focus groups
• Ethnographic research
• Content/Text Analysis
• Case study research
48. Quantitative research
•Descriptive in nature.
•Enables marketers to “predict” consumer behavior.
•Research methods include experiments, survey
techniques, and observation.
•Findings are descriptive, empirical and
generalizable.
49. Mixed method
Triangulation : means using more than one method to collect data on the.
same topic. This is a way of assuring the validity of research through. the use of
a variety of methods to collect data on the same topic, which. involves different
types of samples as well as methods of data collection.
• Mixed methods combine qualitative and quantitative approaches to
research.
• There are a number of reasons why mixed methods are used, including the
feeling that a research question can be better addressed by:
• Collecting qualitative and quantitative data, and then analysing or
interpreting that data, whether separately or by mixing it.
• Conducting more than one research phase; perhaps conducting qualitative
research to explore an issue and uncover major themes, before using
quantitative research to measure the relationships between the themes.
50. Significance of Research
The main purpose of research is to inform action, to prove a theory,
and contribute to developing knowledge in a field or study.
• A Tool for Building Knowledge and for Facilitating Learning
• Means to Understand Various Issues and Increase Public Awareness
• An Aid to Business Success
• A Way to Prove Lies and to Support Truths
• Means to Find, Measure, and Take Opportunities
• A Seed to Love Reading, Writing, Analyzing, and Sharing Valuable
Information
• Nutrition and Exercise for the Mind
51. Research Methods versus Methodology
• Research methods may be understood as all those methods/
techniques that are used for conduction of research. Research
methods or techniques, thus, refer to the methods the researchers
use in performing research operations.
52. Research Methodology
• The scope of research methodology is wider than that of research
methods. Thus, when we talk of research methodology we not only talk of
the research methods but also consider the logic behind the methods we
use in the context of our research study and explain why we are using a
particular method or technique and why we are not using others so that
research results are capable of being evaluated either by the researcher
himself or by others.
• Why a research study has been undertaken, how the research problem has
been defined, in what way and why the hypothesis has been formulated,
what data have been collected and what particular method has been
adopted, why particular technique of analyzing data has been used and a
host of similar other questions are usually answered when we talk of
research methodology concerning a research problem or study.
53. Importance of Knowing How Research is Done
In fact, importance of knowing the methodology of research or how research is done stems from the following
considerations:
• For one who is preparing himself for a career of carrying out research, the importance of knowing research methodology
and research techniques is obvious since the same constitute the tools of his trade. The knowledge of methodology
provides good training specially to the new research worker and enables him to do better research. It helps him to
develop disciplined thinking or a ‘bent of mind’ to observe the field objectively. Hence, those aspiring for careerism in
research must develop the skill of using research techniques and must thoroughly understand the logic behind them.
• Knowledge of how to do research will instruct the ability to evaluate and use research results with reasonable confidence.
In other words, we can state that the knowledge of research methodology is helpful in various fields such as government
or business administration, community development and social work where persons are increasingly called upon to
evaluate and use research results for action.
• When one knows how research is done, then one may have the satisfaction of acquiring a new intellectual tool which can
become a way of looking at the world and of judging everyday experience. Accordingly, it enables use to make intelligent
decisions concerning problems facing us in practical life at different points of time. Thus, the knowledge of research
methodology provides tools to took at things in life objectively.
• In this scientific age, all of us are in many ways consumers of research results and we can use them intelligently provided
we are able to judge the adequacy of the methods by which they have been obtained. The knowledge of methodology
helps the consumer of research results to evaluate them and enables him to take rational decisions.
54. Criteria of Good Research
• Purpose clearly defined.
• Research process detailed.
• Research design thoroughly planned.
• High ethical standards applied.
• Limitations frankly revealed.
• Adequate analysis for decision maker’s needs.
• Findings presented unmistakably.
• Conclusions justified.
• Researcher’s experience reflected.
55. Characteristics of Research
• Research is directed towards the solution of a problem.
• Research is based upon observable experience or empirical evidence.
• Research demands accurate observation and description.
• Research involves gathering new data from primary sources or using
existing data for a new purpose.
• Research activities are characterized by carefully designed procedures.
• Research requires expertise i.e., skill necessary to carryout investigation,
search the related literature and to understand and analyze the data
gathered.
• Research is objective and logical – applying every possible test to validate
the data collected and conclusions reached.
• Research involves the quest for answers to unsolved problems.
• Research requires courage.
• Research is characterized by patience and unhurried activity.
• Research is carefully recorded and reported.
56. Research Process
• Define Research Problem and objectives
• Literature review
• Review concept and theories
• Review previous research findings
• Developing research model and formulating hypotheses
• Research design (writing research proposal)
• Data collection
• Data analysis
• Interpret the findings and compile the report
(final dissertation)
58. Research Problems in Finance:
• - The operations of financial institutions
• - Optimum financial ratios
• - Mergers and acquisitions
• - Leveraged buyouts
• - Intercorporate financing
• - Yields on mortgages
• - The behavior of the stock exchange
