Abstract: High volatility can reflect rising fundamental uncertainty or information that resolves uncertainty. In a two-channel model, the covariance of daily changes in realized and implied volatility separates the two. A negative covariance marks falling policy uncertainty, and its high-volatility months cluster around large FOMC surprises. Higher volatility then precedes lower returns, and those high-volatility months offer less reward per unit of risk. A no-leverage rule exiting after such months earns significant annualized alpha of 2.1% to 4.4% over buy-and-hold and the volatility-managed portfolio in three of four U.S. indexes. Whether lower exposure benefits investors depends on the source of volatility.

Selected conferences: 2025 SFA Annual Meeting, 2025 MFA Annual Meeting (PhD Symposium), 2025 SWFA Annual Meeting, 2024 FMA Annual Meeting, 2024 FMA Doctoral Student Consortium

Abstract: We develop a daily measure of Chinese monetary policy shocks from granular variation in the weighted average cost of interbank borrowing driven by both quantity- and interest rate-based policy changes. Our measure addresses the common challenge in emerging markets of lacking a reliable proxy for monetary policy stance due to multi-dimensional objectives and complex policy toolkits. The measure shifts a wide spectrum of money and credit market interest rates on impact. In the equity market, Chinese stocks with higher monetary policy exposure earn negative risk premiums, consistent with their role as hedges against adverse economic shocks to which the central bank responds with expansionary policy. Importantly, our measure recovers the canonical monetary transmission to the real economy such that contractionary policy significantly reduces aggregate output and prices while elevating financial risk, consistent with standard macro-finance theory yet unattainable with existing Chinese monetary policy measures.

Awards: 2025 Great Lake Finance Forum Best Paper

Selected conferences: 2025 Great Lake Finance Forum*, 2025 Fudan Forum on Frontiers in Finance*, 2025 China International Conference in Finance (CICF 2025), The 7th China International Conference in Macroeconomics (CICM 2025)*, 2024 China Financial Research Conference (CFRC 2024)*, 2023 Asia Meeting of the Econometric Society (Beijing, China), 2023 Asia Meeting of the Econometric Society (Singapore)*