Dr Paul Docherty is helping people to make more informed decisions about their investments.
While stock markets are often associated with greed, Dr Paul Docherty’s research on Australian financial markets is for the greater good. Aware of the fiscal challenges and opportunities presented by our country’s ageing population, the value of his research is in maximising the chance that people are able to retire financially independent.
“Increased life expectancies mean that future generations will have longer periods across which they need to drawdown on the wealth accumulated across their working life,” he explains.
Our wellbeing during old age is currently dependent upon how our superannuation investments perform over the course of many decades.
“So I look at strategies that the superannuation industry can adopt in order to maximise the return and minimise the risk of these assets.”
Paul’s quantitative pursuits are also motivated, in large part, by the global financial crisis (GFC) of 2008.
“The GFC was an economic event that had a significant social impact on almost a whole generation,” he recalls.
“But its effects on some individual investors could and should have been mitigated.”
Skin in the game
Paul’s research career began in 2008, when he commenced a PhD at the University of Newcastle (UON). Focused on accounting and finance, the three-year probe compared different ways of pricing stocks in the Australian equity market.
“These efforts culminated in the identification of several factors that can explain variations in the stock returns of Australian companies,” he shares.
Forming the basis of consultancy work undertaken with superannuation funds across the country, Paul’s candidature serves to assist in what he terms “knowledge transfer.”
“I don’t just want to publish things that sit on dusty book shelves,” he elaborates.
“So I’m regularly working with industry, giving briefings and presentations so that my research is put into practice.”
“It’s the best reward.”
Lead and succeed
Paul stayed at UON after receiving his award in 2011, and is now a Senior Lecturer within its Business School. The born and bred Novocastrian is now exploring a second area of study – corporate governance.
“This is in light of the fact that there have been a number of high-profile collapses in Australia over the past decade, such as with One-Tel and HIH Insurance,” he comments.
“We can say retrospectively that poor management was a systemic problem.”
“There was potentially some failing on behalf of the executives.”
In the process of compiling a broad database that can be used to develop “early warning signals,” Paul is hoping to help investors and the broader corporate community to be more proactive about making structural improvements. This project has already attracted the attention of the funds management industry, and is being financially supported by Platypus Asset Management.
“I’m wanting to identify the characteristics that will ensure Boards of Directors are appropriate guardians of companies for the shareholders,” he states.
“The aim is to mitigate the economic and societal costs associated with corporate failures.”
Holding the reins
When asked about any gaps that need filling in his research area, Paul is quick to answer.
“Financial markets are things that people tend to idly talk about at barbeques and other informal social gatherings,” he explains.
“Many of us have a large exposure to them – 9.5% of our salary is invested in superannuation.”
“We’re incredibly financially illiterate, however, for how important the subject is for our wellbeing.”
Wholeheartedly believing that a firm understanding of the “basic principles” of stock markets, such as what drives their returns and why their prices fluctuate, will lead to smarter decision making about personal finances, Paul is looking to educate the public on the ins and outs of investing for retirement.
“Different people will have different needs and preferences in this regard,” he suggests.
“My hope is that through knowledge transfer I can help the broader public learn how to allocate their superannuate assets accordingly.”