"LBS gives you the perfect amount of pressure so that you are motivated to able to make very steady progress happily"

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Sicong Li

PhD in Management Science and Operations

What is your doctoral research about?

My research lies at the intersection of financial econometrics and empirical asset pricing, trying to understand why different assets have different expected returns and how the risk compensation of assets varies with economic fundamentals. Specifically, I am particularly interested in evaluating and improving the performance of asset-pricing factor models by incorporating economically-motivated insights into methods in statistics and machine learning.

Could you tell us about an exciting project you worked on?

In “Asset-Pricing Factors with Economic Targets,” co-authored with S. Bryzgalova, V. DeMiguel, and M. Pelger, we propose a method that generalizes PCA to estimate statistical asset-pricing factors that incorporate economic structure. In particular, we propose a modified version of PCA that rewards factors that satisfy cross-sectional and time-series moment targets, which characterize most economic restrictions in asset pricing. The empirical study shows that the economic targets nudge risk factors to better explain the cross-section of expected returns. This manuscript has received the Bates-White Best Paper Award at the 2023 Annual Society for Financial Econometrics conference and is the winner for the 2023 INFORMS Finance Student Paper competition.

What have you enjoyed most in your LBS experience?

I appreciate the academic environment at LBS in the sense that it gives you the perfect amount of pressure. In particular, it does not give you too much pressure so that you feel impetuous when doing research, neither does it give you too little pressure so that you lose focus on research. Instead, the environment at LBS gives you the perfect amount of pressure so that you are motivated to able to make very steady progress happily. For me, this is what I enjoyed the most in my LBS experience.

Do you have any advice for applicants and prospective Ph.D. students?

My advice is twofold. First, please make sure you enjoy doing research. You will be motivated to do research at LBS, so please make sure you enjoy it. If you enjoy to, for example, think deep, read papers, discuss with the professors and colleagues, and write your thoughts into an academic manuscript, LBS is definitely the perfect place. Second, find a nuanced balance between being independent and finding support. This is what I have learned from my experience. Of course, one needs to be independent enough to be an academic researcher. However, if you only focus on stuff that you care and do not really discuss it with others, this is going to be unproductive.