John Kuong's homepage

John Kuong 鄺梓楓

Associate Professor of Finance, CUHK Business School, The Chinese University of Hong Kong

Member of Finance Theory Group

CEPR Research Affiliate (Banking and Corporate Finance)

Email: johncfkuong [at] gmail.com; johnkuong [at] cuhk.edu.hk

CV (last update: Feb 2026)

Research Interests: Financial Intermediation, Market Microstructure, Information Economics

Upcoming presentations, discussions and general updates

Jun, 2026: Present "Sustaining Trading Relationships with Lemons" at WFA meeting.
Feb, 2026: New working papers "Dealers as Record Keepers " and "Sustaining Trading Relationships with Lemons" posted.
Nov, 2025: New working paper "Baskets Full of Cash: Primary Market Frictions and the Performance of Active Bond ETFs " posted.

Working papers

Sustaining Trading Relationships with Lemons [NEW!] [SSRN]

This paper endogenizes the value and persistence of trading relationships in non-anonymous over-the-counter (OTC) markets. In the model, a liquidity-driven client initially chooses to trade with a number of dealers. She would like to commit to trading with these dealers again in the future in exchange for better pricing or services today. When non-anonymity allows dealers to infer the client’s trading motives (i.e., whether driven by liquidity needs or private information) from past trading, the client can credibly commit to these valuable relationships by trading information-sensitive assets, because deviating to trade with alternative dealers would incur an adverse selection discount. This mechanism yields several unconventional results: liquidity-driven, uninformed clients could benefit from trading 1) risky assets that are subject to adverse selection, 2) with a costly technology, 3) in an opaque environment. These results help rationalize why investors trade risky, complex, and illiquid assets. The paper also derives novel testable predictions about how the number of relationships depends on client and asset characteristics.

Dealers as Record Keepers [NEW!] (with Vincent Maurin) [SSRN]

Abstract: Trading relationships in over-the-counter (OTC) markets are persistent and often exclusive, despite technological advances that have expanded clients’ access to dealers. We rationalize this pattern in a model where trading relationships allow dealers to learn their clients’ trading motives from their trading records. Relationship dealers set record-contingent quotes, generating price discrimination that mitigates adverse selection for liquidity-driven clients. Moreover, we show that clients prefer exclusive relationships to keep their record private. As a result, post-trade transparency and trading protocols that facilitate public inference of clients’ trading records by dealers (e.g., Request for Quote relative to Request for Market) may reduce gains from trade.

Baskets Full of Cash: Primary Market Frictions and the Performance of Active Bond ETFs [NEW!]

(with Yuet Chau, Don Noh, Sean Shin)

Abstract: We find that active corporate bond ETFs earn lower net-of-fee alpha than comparable mutual funds, particularly among high-yield funds and even when comparing same-manager funds. We trace this performance gap to a friction inherent in the ETF structure: misaligned incentives between active managers and authorized participants (APs). Bonds received in kind from APs reflect dealer inventory pressures and subsequently earn lower long-horizon returns than bonds purchased directly by the same ETFs. Knowing this, active ETFs—unlike passive ETFs—rely predominantly on cash to settle creation and redemption, and trade directly in the bond market, much like mutual funds. We investigate the determinants of cash settlement and build a model that rationalizes the performance gap despite managers’ flexibility to use cash. Overall, these results suggest that the ETF structure introduces frictions to active bond funds, to which managers respond by using cash settlement as a partial remedy.