Call for Proposals
The SWIFT Institute invites proposals for research looking at the unit cost of financial services and why it has increased over time.
The Unit Cost of Financial Services: Why is it Increasing?
Thomas Philippon's paper Finance vs. Wal-Mart: Why are Financial Services so expensive? concludes that the finance industry of 1900 is just as able as the finance industry of 2000 to produce loans, stocks and bonds, and it did so more cheaply despite advances in information technology. He argues that the total compensation of financial intermediaries as a fraction of GDP is at an all-time high of 9% (2% higher than it needs to be, representing an annual misallocation of resources of $280 billion for the U.S. alone).
Why is the cost of financial services increasing? The July 2012 Kay Review of UK Equity Markets and Long-term Decision Making mentions that the proliferation of intermediation and intermediaries adds to the costs of the investment chain. Does the improvement in IT help or hinder the unit cost? Is the upward trend likely to continue and if so is it sustainable? Is this upward trend a global phenomenon or is it concentrated in developed countries?
TOPICS: Research proposals can be theoretical or empirical. The focus of the research could look at the following (other suggestions are welcome)
- Are increasing costs global or concentrated in specific countries/regions?
- How do different countries/regions compare? Does this comparison help to explain broader economic phenomenon such as cross-border capital flows?
- What impact do changing regulations have on unit costs?
- Staffing level evolution over time - What has impacted staffing levels (e.g. IT)?
- What impact does global trading vs. domestic trading evolution have on unit costs?
- How has the financial services landscape (e.g. players involved) evolved over time and what is the impact on unit costs?
GRANT & WORKING PAPER: A grant of EUR 15,000 will be awarded to the author of the selected proposal. 50% will be paid immediately; the remaining 50% will be paid on submission of a working paper following the research.
PAPER SUBMISSION PROCEDURE: Please submit your research proposal as follows:
1. CV/bio including education, work history, research experience, publications, etc.
2. Description of your research project (2,500 words maximum) to include the following:
- Objective of your research
- Methods by which you intend to undertake your research
- Timeframe by which you intend to complete your research
3. By email in MS Word/Excel/PowerPoint format, and/or pdf.
Deadline: Proposals must be submitted no later than 24 September, 2012
Email: Send submissions to: Information.SWIFT.Institute@swift.com