LSE’s outstanding contribution to social science research was recognised in the 2021 Research Excellence Framework (REF). An analysis of the REF finds that LSE is the top university in the UK based on proportion of world leading (4*) research outputs produced.
Fifty eight per cent of LSE’s research was judged to be 'world leading' (4*) and 35 per cent was deemed to be 'internationally excellent' (3*).
LSE is also the joint second ranking university in the UK overall, when considering research outputs, research impact and research environment.
The LSE Department of Finance is one of the Europe's leading finance groups, with strengths in many areas of theoretical and empirical asset pricing and corporate finance, as well as in financial intermediation and regulation. Its achievements across these fields are evident in the results of the REF2021 assessment, to which it made a joint submission with the LSE Departments of Accounting and Management. An impressive 60 per cent of research included in that submission received the highest 'world leading' (4 star) rating; a further 36 per cent was identified as ‘internationally excellent’ (3 star). This result saw LSE ranked among the best in the UK for Business and Management Studies.
New approaches to forecasting financial markets
Professor Ian Martin (Department of Finance)
Research at LSE has produced innovative ways to forecast the behaviour of assets in exchange markets, improving how financial institutions can analyse volatility and market “bubbles”.
Summary of the impact
The equity premium – the difference between expected returns on risky investments and the certain return on risk-free securities or portfolios – is one of the central quantities of finance and macroeconomics. This is not directly observable but can be inferred using observed stock prices and other market variables.
Institutions such as central banks, monetary policymakers, and asset management companies all need ways to forecast the behaviour of financial asset markets to calculate this risk premium.
Professor Ian Martin’s research, published in a series of papers between 2013 and 2020, has introduced new methods for forecasting the behaviour of stock markets and currency markets. The distinctive feature of his work is its reliance only on observable asset prices, making the resulting forecasts observable in real time.
This research has generated new debate about ways to forecast financial assets and improved how financial institutions understand risk premiums. It has also directly shaped the work of both public and private sector financial institutions.
Read the full impact case study
Supporting the development of a safer, more robust financial system for the eurozone
Professor Dimitri Vayanos (Department of Finance), and Professor Ricardo Reis (Department of Economics)
In response to the eurozone crisis, LSE economists co-developed an influential proposal for European Safe Bonds (ESBies), which would protect the financial system from future shocks.
Summary of the impact
The European sovereign-debt crisis exposed serious flaws and inconsistencies in the design of the eurozone financial system.
Between 2010 and 2012, eight economists from across Europe, including professors Luis Garicano and Dimitri Vayanos from LSE and Professor Ricardo Reis, who joined the School in 2015, developed a proposal for creating European Safe Bonds (ESBies) to address these two major flaws in the eurozone financial system. They set out the regulatory changes needed to introduce the bonds, the institutional design of a new European Debt Agency, and the necessary governance mechanisms.
Since they were first proposed, European Safe Bonds have been considered in virtually all European policy debates on public debt, including in response to the 2020 recession. Almost every member state central bank, debt office, and ministry of finance has engaged with the proposals.
Read the full impact case study.
Measuring Research Impact
The Research Excellence Framework (REF) is the system by which the UK’s higher education funding bodies assess the quality of research in publicly funded UK higher education institutions (HEIs). REF 2021 comprised three elements:
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academic outputs, comprising a portfolio based on the FTE of REF-eligible staff submitted;
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research impact, submitted as a number of impact case studies (ICSs) in proportion to the total FTE of REF-eligible staff submitted;
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research environment, comprising the total number of research degrees awarded between 2014 and 2020, total research income received over the same time period, and an environment statement detailing how the submitting unit(s) supported research and impact over the period.
Outputs, impact and environment were weighted 60:25:15 respectively. All three elements were graded on a scale from 0 (unclassified) to 4* (world leading) and the results were published as quality profiles showing the percentage of outputs, impact and environment considered to meet each of the starred levels.
You can read more about the School's world-leading work on the LSE Research website, which highlights the many ways the School’s research has positively influenced public life – including in business, government, the media and civil society.