Good News !!
It is one of the easiest parts of the whole process, provided you have done your homework well. The idea here is to show your understanding of:
- Academic research field you are interested in
- The school has professors currently working in the same field
- Your past experiences/ studies have prepared you for this
- How much motivation you bring
Make sure to be creative, but not too much. Any graph or picture showing your research result is definitely off the charts. Similarly, discussing achievement of your advisor/ school or company is just wasting space. I once saw an essay discussing breakfast menu in a posh restaurant, his idea was to bring focus to the big event he went to. In the real world putting a good light on your surroundings does reflect on yourself. However, in an essay, it becomes very apparent what you are trying to accomplish. Also, avoid humble brag.
Each sentence you add to the essay, try to think in terms of what it would say to the faculty who wants to work with you. The standard statement of purpose is one to one and a half page. Any longer than that implies, you couldn’t edit well.
I could share my essay; however, make sure you write your own essay from scratch rather than following a template because it could be frustrating for professors to read similar essays.
I am interested in grasping dynamics among factors that determine sovereign bond interest rates of emerging markets, and how respective countries could manage debt financing accordingly. For the past four years, I have been observing bond prices, looking for patterns, creating models to predict yield curve movement and trying to make sense of factors involved to find trading opportunities. However, like all capital market jobs, the job brings along the inevitable curse of continuous present, in which always being in the moment doesn’t allow one to contemplate over alternate possibilities. I believe a doctoral degree would provide me an opportunity to take a step forward to gain a comprehensive understanding of the subject and an ability to experiment/ creatively play with the elements involved.
I have worked with some of the factors via statistical frameworks: forecasting yield curve trend based on principal component analysis of time series data of local/ US Treasury yield curve, pricing external debt based on z-spread/ par equivalent credit spread calculated via CDS curve, and predicting central bank policy rate based on implied forward rates derived from the onshore swap curve. These models have become part of **** publication and helped us win 2015 Euromoney best **** research award. To appreciate qualitative aspects of the problem, I work closely with regional economists and write reports on macro dynamics of **** markets. I aspire to be a professor at a research-oriented university and have modest experience of teaching finance to **** employees, aiding them in department switch. To have a hands-on academic research experience, I reached out to ****, professor at ****.
With ****, I work on asset allocation and risk aversion (proportion of non-equity household wealth), using samples of US population taken from the **** from 1984 to 2012. We have conducted multivariable regression, including statistical adjustments for errors, to derive individual investor’s preference for government bonds and savings account based on demographic and socioeconomic characteristics. Owing to a sample size of around 0.1m x 1k per panel, the work has been done mostly on SAS. Our current results indicate that risk aversion decreases as one rises above poverty, gains knowledge and decreases significantly for very wealthy. Currently, we are trying to segregate our data into cohorts, so as to work with fixed regression models across timelines. The experience has helped me comprehend intricacies of research methods, data management and non-linearity of output in research efforts.
Having an experience lopsided towards quantitative and technical aspects, I have strived to understand the fundamentals. I started early by taking all my undergraduate electives in finance, auditing courses above permissible semester load and reading basic books on fixed income/ econometrics/ option pricing. After college, I have kept myself involved by pursuing professional courses from CFA, FRM, and Actuaries (India). In the meantime, I have also learned new programming languages/ software packages, including Visual Basics, HTML, Java, SQL, SAS, MatLab; Currently, I am exploring Python to understand concepts of Machine Learning. On a day to day basis, I go through existing academic literature to better appreciate sovereign bond market forces. **** paper titled “****” has been particularly insightful.
Policy rate changes are an important factor in deciding yield curve movement. We do try to anticipate central bank cuts/ hike via calculating market implied forward rates (discussed briefly earlier). However, our analysis ends at predicting the central bank rate changes and leaves subsequent effects on term structure to subjective interpretation. **** paper captures the term structure behavior after the Federal Reserve (Fed) adjusts the target rate. It proposes a ****. The discussion on current yield curve being an efficient filter for the current information, macroeconomic and otherwise, and can provide a forecast for future Fed rate changes becomes particularly critical going ahead; as Fed hike is indeed impending and central bank rates in most emerging European markets remain at an all-time low.
Besides **** work, my research interests align closely with **** (yield curve/ inflation forecasting), **** (international finance and financial institutions) and **** (CDS/ bond spreads and macroeconomic volatility). In fact, our framework for yield curve estimation using Nelson-Siegel Curve is on similar lines to **** work on relationships among credit spread factors and equity volatility factors. As such, I would be deeply honored to learn from the esteemed professors at ****; and am very thankful for the consideration.