Bin Wei

Financial Economist and Adviser

Federal Reserve Bank of Atlanta

(12) Sovereign Risk and Financial Risk (with Simon Gilchrist, Vivian Z. Yue, Egon Zakrajsek), forthcoming, Journal of International Economics.

In this paper, we study the interplay between sovereign risk and global financial risk. We show that a substantial portion of the comovement among sovereign spreads is accounted for by changes in global financial risk.

(11) Racial Disparities in Mortgage Lending: New Evidence based on Processing Time (with Feng Zhao), forthcoming, Review of Corporate Finance Studies. [Paper] [Internet Appendix] [SSRN]

This paper examines racial disparities in mortgage processing time prior to the Global Financial Crisis. We find that Black borrowers are under-represented and experience a longer processing time than white borrowers among the mortgages securitized by government-sponsored enterprises (GSEs). At the same time, Black borrower are over-represented and face a similar processing time among the privately securitized (PLS) mortgages. Additionally, Black borrowers are strongly associated with the faster segments of mortgage markets, faster lenders within each segment, and the types of loan products that are processed faster, all of which subsequently experienced higher defaults.

(10) The Two-Pillar Policy for the RMB (with Urban Jermann and Vivian Zhanwei Yue), forthcoming, Journal of Finance. [Paper] [Internet Appendix]

We document stylized facts about China's recent exchange rate policy for its currency, the Renminbi (RMB). Our empirical findings suggest that a "two-pillar policy" is in place, aiming to balance RMB index "stability" and exchange rate "flexibility" . Through a theoretical model, we quantify the main trade-off faced by the central bank.

(9) Financial Intermediation Chains in an Over-the-Counter Market (with Ji Shen and Hongjun Yan), 2021, Management Science, Volume 67, Issue 7, Pages 4623–4642.

Modern financial markets have long intermediation chains (many layers of intermediaries). This paper offers a theory and its empirical assessment.

(8) Liquidity Backstop and Dynamic Debt Runs (with Vivian Zhanwei Yue), 2020, Journal of Economic and Dynamics Control, Volume 116.

We provide a micro-foundation for the role of liquidity backstops in mitigating runs. Using several run episodes in the short-term municipal bond markets during the financial crisis, we identify the value of liquidity backstops around 14.5 basis points per annum.

(7) Sovereign Debt-Theory (with Vivian Zhanwei Yue), November 2019, Oxford Research Encyclopedia of Economics and Finance.

We review recent theoretical and quantitative studies in the sovereign debt literature.

(6) Ambiguity Aversion and the Variance Premium (with Jianjun Miao and Hao Zhou), Quarterly Journal of Finance , June 2019, Volume 9, Issue 2, Pages 1–36. (Lead Article)

This paper offers an ambiguity-based interpretation of the variance premium. We find that about 97 percent of the mean variance premium can be attributed to ambiguity aversion.

(5) Optimal Long-Term Contracting with Learning (with Zhiguo He, Jianfeng Yu, and Feng Gao), Review of Financial Studies , June 2017, Volume 30, Issue 6, Pages 2006–2065.

With uncertain profitability in dynamic agency relationship, the agent has incentive to shirk to manipulate the principal's future belief, giving rise to a long-lasting hidden information problem. The optimal contract implements time-decreasing effort, and has a feature of "stock options" in that incentive goes up after good performance.

(4) Uncertainty, Risk, and Incentives: Theory and Evidence (with Zhiguo He, Si Li, and Jianfeng Yu), Management Science, January 2014, Volume 60, Issue 1, Pages 206–226.

2013 The Chinese Finance Association (TCFA) Best Paper Award

In contrast to a negative risk-incentive relation predicted by standard agency theory, the learning-by-doing effect may lead to a positive uncertainty-incentive relation. We present empirical evidence that is consistent with this prediction.

(3) Exchange Rate Policy and Sovereign Bond Spreads in Developing Countries (with Samir Jahjah and Vivian Zhanwei Yue), Journal of Money, Credit and Banking, October 2013, Volume 45, Issue 7, Pages 1275–1300.

We find that countries with a less flexible exchange rate regime are less likely to issue bonds and pay higher spreads.

(2) A Model of Portfolio Delegation and Strategic Trading (with Albert S. Kyle and Hui Ou-Yang), Review of Financial Studies, November 2011, Volume 24, Number 11, Pages 3813–3840.

This article endogenizes information acquisition and portfolio delegation in a one-period strategic trading model. We find that, when the informed portfolio manager is relatively risk tolerant (averse), price informativeness increases (decreases) with the amount of noise trading.

(1) Endogenous Events and Long Run Returns (joint with S. "Vish" Viswanathan), Review of Financial Studies, April 2008, Volume 21, Number 2, Pages 855–888.

We present theory and simulations for event studies when events are endogenous. Applications of the theory to long-term returns after IPOs and SEOs are discussed.