Abstract: I propose a covariance measure between daily changes in realized and implied volatility to differentiate periods' volatilities mainly driven by fundamental uncertainty and those by information. Motivated by the different autocorrelations in volatility—positive in traditional asset pricing models and negative in Ai, Han, and Xu (2022)'s information-driven volatility model—this measure significantly improves the predictability of lagged volatility for future market returns. A market timing strategy that takes no risk when information-driven volatility is high, significantly improves the market portfolio's Sharpe ratio in comparison to Moreira and Muir (2017)'s broader approach. I also show that differentiating fundamental-driven and information-driven volatilities can significantly improve return predictions for factors in Fama and French (2015) model and those in Hou, Xue, and Zhang (2015) q model.

Selected conferences: 2025 SFA Annual Meeting (scheduled), 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 that incorporates both quantity and interest rate-based policy changes. Our shock measure serves as a sufficient statistic tailored to the Chinese market, addressing the common issue in emerging markets of lacking a key proxy for monetary policy stance due to multidimensional objectives and complex toolkits. We validate its effectiveness in capturing unexpected monetary policy changes in China. Shedding light on monetary policy transmission, our shock series reveals that Chinese monetary policy significantly affects the equity and credit risk of non-financial firms and shifts real macroeconomic variables.

Selected conferences: 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)*