Publication
Investor Attention from Internet Search Volume and Underreaction to Earnings Announcements
with Joon Chae, Ryumi Kim, Sustainability, 2020, 12(22), 9358
Abstract:
Recent studies have used internet search volume as a measure of investor attention. In addition, literature argues that limited investor attention contributes to market underreaction to public information such as earnings announcements. We show that firms with more investor attention captured by abnormal internet search frequency have stronger announcement-day reactions and weaker post-earnings-announcement drift. The effect of abnormal search frequency is stronger for medium and small-sized firms, which usually receive insufficient attention. Our evidence indicates that firms with higher search intensity are traded more, especially by individual investors. Moreover, we imply that it is a sustainable development for investors to be able to use public information through the internet for investment in stock markets.
Working Paper
[1] Common Factors in Stock Returns at High Frequency Level
Single Authored (Job Market Paper)
Abstract:
This paper introduces a novel factor model designed to explain intraday stock returns, addressing the limitations of traditional models in high-frequency settings. I propose a NOISE factor alongside a RISK factor, updated at 30-minute intervals, to capture the significant role of noise in short-term price movements. The suggested model outperforms existing factor models in explaining the cross-section of expected intraday returns. I also document that these new factors possess unique explanatory power not subsumed by traditional factors, thus providing incremental insight into stock return behavior.
[2] How does Zero-Day-to-Expiry options trading affect the volatility of underlying assets?
with Jonathan Brogaard and Peter Won
Abstract:
The monthly trading volume and proportion of Zero-Day-to-Expiry (0DTE) options have increased from zero to 26 million contracts and from zero to 40% between 2011 and 2022. We study how 0DTE option trading affects the volatility of the underlying asset. We find that more 0DTE options trading increases the volatility of the underlying asset. An increase of one standard deviation in the instrumented trading volume of 0DTE options relative to the total volume of other options results in an approximately 13.64% increase in the 5-minute volatility of the underlying asset on the same day.
[3] Intraday Residual Reversal in U.S. Stock Market
with Jonathan Brogaard and Hanjun Kim
Abstract:
Li et al. (2023) show that intraday risk factor exposure leads to predictable returns. In this paper, we focus on the unexplained price movements from the factor-based intraday model. We document an economically large and statistically significant return reversal based on the previous period’s residual return. This residual reversal strategy, which buys stocks with negative residuals and sells stocks with positive residuals, earns a monthly return of 13.5%. The strategy captures the returns to liquidity provision to the transitory component of stock returns.
[4] The More You Know, The More You Hold: Disposition effect by types of funds
Single authored
Abstract:
This study reveals that the degree of a disposition effect differs according to the type of fund. I hypothesize that investors with familiar and well-known funds, such as a domestic or equity funds, experience a disposition effect. Since these investors feel more responsible for their failure and do not place the majority of the blame on the manager, they are reluctant to realize a loss. However, investors who have less familiar and less-known types of funds, such as foreign or bond funds, do not experience a disposition effect, as they tend to delegate their investment to a manager and are not reluctant to realize a loss by blaming the manager. The empirical analysis confirms that a disposition effect is greater in equity funds than bond funds and is greater in domestic funds than foreign funds. Moreover, the investment location has a greater influence on the degree of the disposition effect than the characteristics of the funds do.