8 December 2021. Earlier this year, teams of researchers at the Stockholm School of Economics, the University of Innsbruck, and the Vrije Universiteit Amsterdam came up with the idea to design the first crowd-sourced empirical paper in economics and finance. Their idea was to distribute the same data set to research teams globally in January of 2021, have them analyze it addressing the same six empirical questions and submit their findings later in June 2021.

Ultimately, 164 research teams participated in the project which sought out to examine the trading of Eurostoxx 50 futures from 2002 to 2018 on the Deutsche Börse. The teams then submitted their findings anonymously and their papers were adjudicated by top scholars who were not involved initially as research teams. The research teams and their findings were then rated and the team of Andrea Barbon and Angelo Ranaldo from the Swiss Institute of Banking and Finance (s/bf-HSG) were ranked as one of the top five teams, having received a perfect grade from the judges.
 
Crowd-sourcing in research
Barbon noted that similar studies have been performed in other disciplines, including psychology, neuroscience, and sociology. He believes that similar projects such as this Fincap project, will embrace a crowd-sourcing model in the future, not only in banking and finance, but in the other social sciences as well.   

“Crowd sourcing has the advantage that the process unveils how different researchers run the analysis,” stated Barbon. Studies designed with a crowd-sourcing component could give researchers a broader and more reliable picture of the questions the study seeks to answer in the future. Barbon also thinks that crowd-sourced research projects will shed more light on the scientific process itself and may lead to improvement to it.

Barbon also commented on the studies design, asserting that the main disadvantage to these types of studies is that they are less efficient than traditional studies. “If you have a large number of researchers working on the same topic, you are answering less questions with research.” He believes that this may slow-down scientific discovery in the short-run but it may make it more reliable and ultimately faster in the long-term.

Tops among peers
A total of 34 peer evaluators were selected from a pool of experienced professors in finance, who were not part of any of the 164 research teams. Every submitted paper was reviewed by two evaluators, randomly selected across those available. The paper submitted by Barbon and Ranaldo received the top scores.

One of the factors that likely made the HSG paper successful was that they were the only team to exploit the full sample of data. Barbon and Ranaldo also developed an algorithm to re-construct variable leveraging on market microstructure theory. Thanks to this algorithm, their analysis exploited all the available information.

An overview of the fincap project can be found here and the paper can be found here.

Image: Unsplash / Annie Spratt