Morgan Stanley Equity Microstructure Research Grants
August 18, 2006

Morgan Stanley is pleased to announce the continuation of a program to fund academic research on relevant topics in equity market microstructure and related disciplines. Please note that the requirements of the program have changed significantly from previous years. The program now solicits proposals for research on specific topics.

Researchers whose grant proposals are accepted will receive an honorarium. Researchers may additionally be asked to acknowledge Morgan Stanley and possibly to present the finished paper at a conference organized by Morgan Stanley. Each accepted proposal would receive an honorarium of US $20,000. A substantial number of grants are available and renewals are possible. PhD students may apply for dissertation research support. Larger and more ambitious proposals that may take more than one year will also be considered.

It is important to read the research requirements carefully before making a submission. The focus this year has changed to motivate research on topics that are relevant to the performance of risk or capital commitment trades by financial intermediaries like Morgan Stanley. The process begins with a request from a client for a price. If a price is agreed upon, then the trade is consummated and Morgan Stanley assumes the other side as a risk position. The risk position may be hedged with other positions and is subsequently liquidated in the market over time. The overall process of competitively pricing, hedging and liquidating customer orders is of great importance to all such firms and their clients.

The intent of the Morgan Stanley Equity Market Microstructure Research Grant Program is to foster innovative academic research on all aspects of this problem. The asset types of interest are equities, ETFs, futures and listed options in the global marketplace. Pricing can be for a single position or a program relative to an execution benchmark. Specific research topics include:

  1. Portfolio Risk Modeling: Methods to predict the risk of large portfolios over time. This could include factor models and multivariate volatility models.
  2. Risk Model Evaluation: Methods to evaluate a risk model designed for large portfolios and over time.
  3. High Frequency volatility and volume forecasting methods.
  4. Liquidity Models: Forecasts of price impact, resiliency and spread and their multivariate generalizations.
  5. Limit Order Models: Optimal placement of limit orders from both theoretical and empirical points of view.
  6. Optimal Execution Strategies, such as division of orders over time, markets and across elements of a portfolio or program trade.
Research proposals that have long-term potential to improve performance of these functions will have top priority. The research must be innovative and of academic interest. Empirical studies of publicly available financial data that do not illuminate these problems will have lower priority. Grants will be made to junior and senior academics as well as to promising PhD students.

Proposal submissions should include:
  • 1-page summary proposal
  • curriculum vitae
  • relevant previous papers
  • PhD students should include letters of reference from their thesis advisors
Proposals should be submitted electronically by December 15, 2006 to microstructure-research@morganstanley.com. It is envisioned that the successful proposals will be announced in early March of 2007.