Proposals for Theses
Please note our general information on theses. In addition, please note that most theses supervised by the institute have an empirical part. We therefore recommend that students interested in writing a Master thesis attend the modeling and research courses offered by the finance institutes (Financial Modeling, Research in Finance).
Machine learning and stock market predictability
You shall examine whether estimation approaches from machine learning can help improve the precision of stock market forecasts compared to existing approaches. The paper stated below is an example of an "existing approach". The choice of machine learning methods will be discussed before you start working on the thesis. (Contact: Prof. Löffler).
Literature to get started: Rapach, D. E., Strauss, J. K., & Zhou, G. (2010). Out-of-sample equity premium prediction: Combination forecasts and links to the real economy. Review of Financial Studies, 23(2), 821-862.
Prospect theory and predictability
A recent paper has shown that prospect theory can help predict the cross-section of stock returns. In this thesis - after a review of the literature on prospect theory and asset pricing - you shall employ the approach of this paper to examine whether prospect theory can help predict returns of international stock market indices (Contact: Prof. Löffler).
Literature to get started: Barberis, Mukherjee, Wang (2016): Prospect Theory and Stock Returns: An Empirical Test. Review of Financial Studies 29, 3068-3107.
Model selection in credit scoring models
Credit scoring models are regression models that link observed variables to defaults. In this thesis, you shall review the literature on model selection in this context and then conduct your own empirical study. (Contact: Prof. Löffler)
Literature to get started: Tian, S., Yu, Y., & Guo, H. (2015). Variable selection and corporate bankruptcy forecasts. Journal of Banking & Finance, 52, 89-100.
Predicting default rates for rating classes
The risk of a given credit rating such as BBB varies with the business cycle. It is therefore useful to have a model that predicts default rates for rating categories. In this thesis, you shall review the literature on default rate prediction and then conduct your own empirical study in which you enrich standard regression approaches with ones that have been used elsewhere, e.g. in the asset pricing literature (Contact: Prof. Löffler)
Literature to get started: Chapter "Prediction of Default and Transition Rates" in Löffler, G., & Posch, P. N. (2011). Credit risk modeling using Excel and VBA. John Wiley & Sons.