Author: aukeplantinga

Referencing

Proper referencing is important in academic writing. You should know when to use references and how implement the references in a text.

When do you need a reference?

How to implement references

There are many reference styles used in practices. Most journals have their own individual reference style, so the main issue is to chose a reference style and next to implement. In my practice, I often refer to the Journal of Financial Economics reference style.

Most reference styles make use of the Orwell (1984) type of reference: the name of the author followed by the year of the publication in round brackets.

At the end of the thesis, you will present all these references together in one list with the details of each publication. Depending on the reference style, this includes the last name of author, first name(s) or initials, title of the publication, name of the journal, volume number, issue number, and page numbers. There are also specific rules on how to present books, working papers and website in the reference list.

While the style of choice is at the discretion of the writer (actually the publisher), consistency is the main thing to be aware of and the devil is in the details:

Consider the following example of a part of a reference list:

Asquith, P., R. Bruner, and D. Mullins, Jr., 1987, “Merger Returns and the Form of Financing,” Harvard University Working Paper
Bowman, Robert G., 2006 ‘Understanding and conducting event studies’ Journal of Business Finance & Accounting, Vol. 10, No.4, pp. 561-581.
Corrado, C. J. 1989. A nonparametric test for abnormal security-price performance in event studies. Journal of Financial Economics, 23(2), 385–395.

This example of a reference list contains several inconsistencies (list may not be exhaustive):

  • While the second and the third conclude with a point (.), the first does not.
  • The year in the firs reference is followed by a comma, the second is concluded with nothing, and the third is concluded with a point.
  • The first and the third references have initials of the authors, while the second reference has first names.
  • The first reference has double hyphens (“), the second reference has single hyphens (‘) and the third reference has no hyphens.
  • The second and the third reference use different ways to present volume and issue numbers
  • The second and third reference use different ways to present page numbers.
  • The first reference uses capitals to start each single noun in the title, while the second and third reference do not have this.

Regional Investing in the Northern Netherlands

Regional Investing in the Northern Netherlands

I am a supporter of the idea to invest in companies that are present in your local neighborhood. This is idea is not very new. For instance the Beardstown Ladies was a group of sixteen ladies of age who started investing with a mere amount of 1,600 USD. They gained a lot of attention in the 1990s with their investment approach based on a very down-to-earth philosophy. According to Buffy Tillitt-Pratt, one of the ladies: “We like to invest in things that we know, and things that we understand, but we also have to look at the numbers too”. They bought for instance stocks of firms that made products they owned themselves (rubber boots, cars) and in shops they new.

While the returns of the Beardstown Ladies were rather overstated, in the end their return wasn’t that bad at all and in 2016 their portfolio was reported to be 450,000 USD. Critics claimed that an investment in an index fund would have yielded a higher value. Perhaps this is true, but by investing in what you know, your remain more motivated to remain loyal to your investment strategy. Most likely, the ladies would never have started investing if they would have to be invested in an index fund.

Apart from buying stocks based on familiarity, you could also chose to invest in stocks that are active in your proximity. Suppose that you are a citizen of Drenthe, Friesland, and Groningen and you want to invest in stocks in the neighborhood, how would you start? My idea would be to invest in stocks of firms that employ people in the region. So a good start would be to collect some of the larger listed employers in the region, as presented in the table below:

Name of stockDrenteFrieslandGroningen
AegonXX
Ahold DelhaizeXXX
INGXXX
KPNXXX
MacDonaldXXX
MelroseX
NL PostXXX
PhilipsX
ShellXXX
TeijinX
VodafoneXXX
Some listed employers in Drenthe, Friesland and Groningen

This list presents firms with more than 800 employees working in one of the three Northern provinces. Many firms represent consumer brands (MacDonald, Philips, Vodafone), were others are very visible as many consumers profit from their services such as Ahold Delhaize (Albert Heijn), NL Post, ING, KPN, Vodafone (Ziggo). A few are less visible: Aegon runs a large office in Leeuwarden and one in Groningen (TKP Pensioen), Teijin is active in Chemicals and Melrose (former activities of Fokker). Based on the list, any investor could create his or her own portfolio of regionally active stocks.

Regional Investing

Regional Investing

Auke Plantinga

In the past two decade we have experienced a dramatic change in the way that households invest. Many have decided to disengage from stocks market investing and switch to a standard savings account, mutual funds or index funds. Obviously, the global financial crisis of 2007/2008 had a lot to do with this too. In 2020 and 2021, the COVID19 crisis kept a lot people at home, re-engaging them with stock markets. Some of them started chasing stocks such as GameStop motivated by boredom or protest against the evil of hedge funds.

Unfortunately, this leads to a disconnect between the typical citizen and the financial markets. Few people understand the true contribution of financial markts to society. Financial markets are a means of allocating investments to valuable projects, facilitating cooperation between people with small savings how do not know each other. Many people lost their trust in financial markets, mostly as a result of the many scandals in the previous two decades.

One reason for losing trust is the strong focus on returns in combination with the anonymity of investments. Money itself doesn’t create wellbeing, but the way it is spend may  have a big impact. As an example, most of us would appreciate a carefully selected personal birthday gift over a check. This also applies to investing. Probably the only benefits of investing in the MSCI Global Large Cap Equity Index are its financial returns and perhaps the idea that you have not been ripped off by a greedy asset manager. There will be little affection in your decision to buy this index.

Globalization provided the world with economic growth, but made it difficult for the individual to understand and believe in the system that generates wealth. It has become abstract and far away, resulting in rising populism and focusing on the home country. Donald Trump got elected on his theme ‘Make America great again’, yellow vests crowd the streets of France, the people of Great Britain opted for Brexit, and so on. 

It is important that humans can effectively engage and connect with the systems that support their lives, and one of these systems is the financial system. For this reason I have a very modest proposal that may be helpful. I propose that people can choose an investment portfolio of firms that is active in the local neighbourhood, province, or city. In particular, I pro`pose that such a portfolio would allocate its investments according to the number of people working in the region for the particular firm. Essentially, you invest in firms that employ your neighbour.

I tried this for firms in the provinces of Groningen, Friesland, and Drenthe in the northern part of the Netherlands. First of all, there are more than 100 companies active in this region that are listed on the stock market. That is sufficient for creating a well diversified portfolio. There are many firms listed on a foreign exchange, and so perhaps the most surprising results is that this regionally oriented portfolio is actually an internationally diversified portfolio. In addition to this, the branches of these firms provide over 20,000 jobs, which provided an additional argument for citizins of the northern part of the Netherlands to invest in this portfolio: Invest in the job of your neighbour! There is no reason why this would not work for any region elsewhere in the world.