Selected Publications: The complete list of publications is here. 

1. Disclosing and Cooling-Off: An Analysis of Insider Trading Rules, with J. Deng, H. Pan, and L. Yang, forthcoming at Journal of Financial Economics. 

   • In contrast to the conventional wisdom from “sunshine trading,” disclosure can even reduce the welfare of all investors. 

   • Welfare implications of a cooling-off period depends on whether the disclosure policy is already in place. 

2. Personality Differences and Investment Decision-Making,  with Z. Jiang, C. Peng, forthcoming at Journal of Financial Economics. 

   • Personality traits lead to persistent heterogeneity in investment decisions, through 3 channels: belief, preference, and social interaction. 

   • Media coverage: BC Center for Retirement Research, Yahoo Finance, Wall Street Journal, AAII.  

3. A Global Version of Samuelson's Dictum, with Y. Xiao and J. Zhang, American Economic Review: Insights, 2022, 4(2):239-54. 

• Samuelson's conjecture: more informational inefficiency at the macro level than at the micro level. 

• Our evidence: more informational inefficiency at the global level than at the country level. 

4. User Interface and First-hand Experience in Retail Investing, with L. Liao, J. Xiang, Z. Wang, J. Yang, Review of Financial Studies, 2021, 34 (9): 4486–4523.

   • A simple rule of thumb to cope with the time pressure in a peer-to-peer lending market: focus on interest rates.

   • The effect is stronger for mobile-based investors and those without first-hand experience of default.

5.  Funding Liquidity Shocks in a Quasi-Experiment: Evidence from the CDS Big Bang, with X. Wang, Y. Wu, and K. Zhong, Journal of Financial Economics 2021, 139, 545–560.

• The CDS Big Bang increased the funding requirement for CDSs, especially for those with credit spreads further away from 100 b.p. and 500 b.p.

• This natural experiment provides direct evidence on the effects of funding liquidity on limits of arbitrage and market liquidity. 

6. Reputation Concerns and Slow-Moving Capital, with S. Malliaris, Review of Asset Pricing Studies, 2021, 11 (3): 580–609.

   • Reputation concerns lead to a preference for negatively skewed return (e.g., shorting puts) and slow-moving capital. 

7. Financial Intermediation Chains in an OTC Market, with Ji Shen and Bin Wei, Management Science, 2020, 67(7): 4623–4642.

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

8. Disagreement Beta, with G. Gao, X. Lu, and Z. Song, Journal of Monetary Economics, 2019, 107, 96–113.

• Belief dispersion is a proxy for perceived investment opportunity: when two investors agree to disagree, both expect to profit from their trade at the expense of their trading partners.

• High disagreement beta high return for stocks, corporate bonds, and MBS.

9. Collateral-motivated Financial Innovation, with Ji Shen and Jinfan Zhang, Review of Financial Studies, 2014, 27 (10): 2961–2997.

• Collateral frictions have a profound effect on our economic landscape, ranging from the design of financial securities, laws, institutions, to various rules and regulations.

10. Anticipated and Repeated Shocks in Liquid Markets, with Dong Lou and Jinfan Zhang, Review of Financial Studies, 2013, 26 (8), 1891–1912.

• Treasury prices in the secondary market decrease significantly before auctions and recover shortly after, i.e., prices are low when the Treasury Department sells. 

• This implies a billion dollar hidden issuance cost.

• Winner of NASDAQ OMX Award for the Best Paper on Asset Pricing at WFA, 2011.

11. Equilibrium Asset Prices and Investor Behavior in the Presence of Money Illusion, with Suleyman Basak, Review of Economic Studies, 2010, 77, 914–936.

• Money illusion, where investors (partially) overlook the impact of inflation, typically only leads to a negligible welfare loss on investors but has a considerable impact on the equilibrium.

• An earlier version with an alternative preference-based formulation.

12. Heterogeneous Expectations and Bond Markets, with Wei Xiong, Review of Financial Studies, 2010, 23, 1405-1432.

• The relative wealth fluctuation, induced by heterogeneous expectations, affects the joint behavior of yield curve, bond premium, yield volatility, and trading volume.

13. Natural Selection in Financial Markets: Does It Work? Management Science, 2008, 54 (11), 1935-1950.

• Selection is excessively slow. Even slightly different preference parameters can make a “very wrong” investor dominate the market.

Working paper:

1. Kyle Meets Friedman: Informed Trading When Anticipating Future Information with L. Yang, X. Zhang, and D. Zhou (Feb. 2025)

   • A Kyle-style trading game is equivalent to a consumption-saving problem with a borrowing constraint. Hence, Ideas from the consumption literature can be applied to the trading model. 

   • What is behind this equivalence result? The informed investor's commitment is zero. Hence, we can reduce the game between two players (informed investor and market maker) into a one-player game. 

2. Investor Memory and Biased Beliefs: Evidence from the Field, with Z. Jiang, H. Liu, and C. Peng, (Nov. 2024)

   • A study of memories and beliefs of a large sample of retail investors.

   • R&R at Quarterly Journal of Economics.

3. A Four-Trillion-Dollar Question: Why Trade ETFs Instead of Their Underlying Stocks?, with W. Jiang and R. Wang (Oct. 2024)

   • The answer is not liquidity: 90% of US equity ETFs are less liquid than their underlying stocks. 

   • We propose and test a convenience hypothesis: Investors trade ETFs for convenience and pay a sizable cost for it. 

   • Convenience costs are decreasing in ETF sizes => rapid market expansion and skewed cross-sectional size distribution.

4. The Road to Negative Futures Prices Is Paved with Financialization, with Y. Ge, W. Kang, K. Tang, L. Yang (Oct. 2024) 

   • Commodity financialization invites price manipulation and leads to instability.

   • A simple model of a futures market crash: a negative closing price, sudden crash right before the market closing time ...

   • R&R at Management Science

5. Response-Order Effects in Economic Surveys: Biases and Ethical Concerns, with Y. Xiao and E. Davidson (Sep. 2024)

   • The order of responses to survey questions leads to a systematic bias in the levels and changes of survey variables. 

   • Implications for the robo-advising industry. 

6. Angry Borrowers: Ex-Post Effects of Social Shaming on Debt Repayment, with L. Liao, Z. Wang, J. Yang, C. Zhou (July 2024)

   • Empirical evidence on negative reciprocity: Privacy infringement during debt collection increases the default rate. 

   • Best Paper Award at the 2020 GSU-RFS FinTech Conference

   • Accepted at Management Science

7. Relatable Information Disproportionately Shapes Expectations, with Y. Xiao (Jun. 2023)

   • Social network information and political leanings have disproportionate influences on expectations across domains.

8. A Search Model of Aggregate Demand for Liquidity and Safety, with Ji Shen, (May 2015)

   • An increase in the supply of Treasury securities decreases the credit spread of investment-grade bonds, but increases the spread between investment-grade and junk bonds. Contrast the reduced form “money-in-the-utility-function” approach with the approach that explicitly models trading friction.

   • Appendix with detailed proofs

9. Informed Trading and Expected Returns, with James Choi and Li Jin (January 2016)

   • Measure the degree of information asymmetry from micro data. Information asymmetry increases expected returns.

   • Featured at the NBER Digest and VOX Column

10. Multiplicity and Stability of OTC Market Equilibrium, with Ji Shen (2016)

    • There are usually 3 equilibria in an OTC market model, only one of them is “stable.” 

Courses taught:

• Accounting/Finance Workshop (PhD) 

• Asset Pricing and Portfolio Analysis (Undergraduate)

• Behavioral Finance (Undergraduate, MFS) 

• Fixed-income Security Analysis (MBA) 

• International Study Trip to China (MBA) 

• Options and Futures (MBA)