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Professor Frank McGroarty BA MA PhD

Chair in Computational Finance & FinTech, Director of Centre for Digital Finance

Professor Frank McGroarty

Professor Frank McGroarty is Professor of Computational Finance and Investment Analytics within Southampton Business School at the University of Southampton.

I received BA and MA degrees in Economics from University College Dublin, after which I embarked on a very successful 13-year career in investment management in the City of London. I worked for Barclays Global Investors, Meinl Capital Markets, State Street and UBS. My former roles include Economist, Fund Manager, Investment Strategist and Head of Research. At Barclays, I pioneered the use of quantitative techniques to build equity portfolios which substantially outperformed market index benchmarks. When I was with UBS, my team moved from number 4 to number 1 in the analysts' rankings. At State Street, I played a major role in the development of the bank's multi-award-winning internet portal and electronic trading platform, "globallink" and in building the foundation for State Street Global Markets. As a co-founder of Meinl Capital Markets, I led a team of investment analysts in the design and implementation of proprietary third-party-fund valuation models and algorithm based trading systems. During my time in the City, I was responsible for equity funds, currency funds and funds-of-funds worth several billion pounds. The funds I managed delivered above-benchmark, positive returns in every year. To put that another way, I never underperformed my benchmark in any year and never delivered a negative return for any client, even when the benchmark market index return was negative. My investment strategies all combined a quantitative approach with a deep understanding of the prevailing economics.

By late 1999, approaching the peak of the dot-com bubble, I found that I could no longer make sense of price behaviour in the financial markets. So I decided to investigate how asset prices formed by way of a part-time PhD degree. Researching my PhD thesis, "Determinants of Prices and Spreads in Global Currency and Money Markets" (University of Southampton, 2003), convinced me that the primary driver of global asset prices was an unsustainable bubble in global credit. Study and reflection led me to conclude that the prevailing consensus of neoclassical perma-equilibrium economics, and in particular, the ubiquitous dogma of efficient markets, had stopped the investment industry asking serious questions about valuation and about fundamental relationships. At the same time, I felt that the industry's emphasis had shifted away from investment analysis and towards sales. For these reasons, I decided to step back from the investment management industry and devote my time to the academic study of how prices evolve in financial markets. In 2003, I joined the University of Southampton.

Throughout my career, I have sought to bridge the gap between academia and practice. In my view, both perspectives are necessary to understand finance. As an investment practitioner, I developed investment strategies from published academic research. I also managed sponsorship of academic research into finance related topics on behalf of investment management firms and investment banks. Based on my own research, I published a number of articles in the financial press and authored numerous specialist broker reports. I was also a frequent speaker at investment industry conferences. In addition, I served on pan-industry boards and working committees including the Global Association of Risk Professionals (GARP), the INstitute for QUantitative Investment REsearch (INQUIRE) and the Investment Management Association (IMA). In the latter organisation, I instigated an industry-wide 'e-finance' working committee to study the implications of the internet for the UK's fund management industry. My practitioner experience has proved very helpful in my teaching. However, it is in my academic research that I have found my practitioner experience to be most valuable, as I believe the essential role of the academic researcher is to objectively critique investment/financial practice, cutting through its marketing spin, self-serving fluff, folk wisdom and misguided practices to reveal the true underlying fundamental drivers and dynamics of financial markets.

Research interests

My research to date has been on the empirical market microstructure of electronic financial markets. The markets I have analysed include the foreign exchange, financial futures and online sports betting markets. I have a very keen interest in computational finance and am a member of the Society for Computational Economics. I am a member of the University of Southampton's cross-disciplinary Computational Modelling Group. I am also on the editorial board of Research in International Business and Finance.

Here is a list of specific research topics that I am currently interested in:

  • Empirical Market Microstructure
  • Computational Finance
  • Systematic Mispricing
  • Network Economics
  • Neural Networks
  • Genetic Algorithms
  • Financial Bubbles
  • Sentiment Analysis
  • Agent-based Models
  • Econophysics
  • Prediction Markets
  • Financial Markets
  • High Frequency Time-Series Analysis
  • Non-Linear Forecasting
  • Algorithmic Trading
  • Support Vector Machines
  • Adaptive Complex Systems
  • Investment Strategy
  • Machine Learning
  • Behavioural Finance
  • Price Evolution
  • Complexity Theory
  • Portfolio Optimisation
  • Sports Betting Markets

I am interested in hearing from aspiring PhD students who would like to pursue a thesis in one of these areas. I am also involved in the university's Institute for Complex Systems Simulation Doctoral Training Centre and I would like to hear from students interested in Complex Systems with a Financial Markets slant. In addition, I am interested in consulting and collaborative research with practitioners in my specialist areas and in having sponsorship for PhD student research on topics of interest to practitioners.

Awards for Research

Since becoming an academic, I have won three highly prestigious international awards for my research:

  • Best paper award at the Global Finance Conference, 2005.
  • Outstanding paper in Financial Markets and Microstructure at the American Midwest Finance Association conference, 2006.
  • Best paper award at the Second International Seminar on China's Economic Growth and Employment, 2009.

Research project(s)

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  • McGroarty, F., Gianvito Lanzolla, Nir Vulkan, Paul Jorion, Patrice Chazerand, Rui Manuel Melo Da Silva Ferreira, Tilman Hengevoss, & Xenia Ziouvelou (2021). AI4People's 7 AI Global Frameworks: Insurance. Atomium: European Institute for Science, Media and Democracy.
  • Nir Vulkan, Aisha Naseer, McGroarty, F., Giulia Del Gamba, John Cooke, Lampros Stergioulas, Paul Jorion, & Raffaella Donini (2021). AI4People's 7 AI Global Frameworks: Banking & Finance. Atomium: European Institute for Science, Media and Democracy.
  • Scowcroft, A., & McGroarty, F. (1995). The UBS optimizer. UBS Securities.
  • Jones, A., Scowcroft, A., & McGroarty, F. (1994). Paying dividends. UBS Securities.

Working Papers

Professor Frank McGroarty
Southampton Business School, University of Southampton, Highfield, Southampton SO17 1BJ, UK

Room Number : 2/3033

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