Research

Working Papers

• “Overconfidence and Correlated Information Structures,” 2023. [Link] [R&R at Economic Journal]

This paper analyzes a model of multiple overconfident traders submitting market orders where traders' private information is subject to correlated errors, as well as its extension to endogenous information. We consider two standard types of overconfidence: overconfidence in own signals and underconfidence in others' signals. The analyses on the effects of overconfidence on traders' behavior and the equilibrium price suggest that these effects are richer than our typical understanding of overconfidence focusing on its positive effect on trading volume as follows: First, trading volume may increase or decrease with overconfidence depending on its type. Second, these different types of overconfidence may differ radically on the patterns of trading volume and price informativeness with respect to the number of traders. Third, overconfidence can cause equilibrium multiplicity in information acquisition.

• “Taxing Speculative Trades in Financial Markets,” 2022.

• "Feedback Effects, Market Valuations, and Real Efficiency," 2024. [Link]

This paper studies the interdependence of myopic corporate behavior and the so-called feedback effect, where financial prices contain useful information for corporate decision making. We model the feedback effect in a mostly standard trading environment, except that the existence of equilibrium and its tractable analysis are ensured by Pareto distribution of productivity. The analysis shows that the feedback effect causes a price inflation and the resulting long-term inefficiency, which can be understood in the context of innovation strategies. This illustrates a challenge in extending the argument on the informational role of financial markets to the long-term productive efficiency.

Publications

Theory papers:

• "A Large Creditor in Contagious Liquidity Crises," (with Frederick Dongchuhl Oh), Journal of Banking and Finance, 146, 106706, 2023.

• "Managerial Incentives and the Medium of Exchange in Takeovers," (with Frederick Dongchuhl Oh), Managerial and Decision Economics, 43(8), 4077-4086, 2022.

• “Potential Competition and Quality Disclosure,” (with Frederick Dongchuhl Oh), Journal of Economics and Management Strategy, 28(4), 614-630, 2019.

• • “Hierarchical Outcomes and Collusion Neutrality on Networks,” (with Biung-Ghi Ju), European Journal of Operational Research, 254(1), 179-187, 2016.

Empirical papers:

• • “The Impact of Mandatory K‐IFRS Adoption on IPO Underpricing,” (with Hyun Duk Lee and Frederick Dongchuhl Oh), International Journal of Finance and Economics 27, 1101-1119, 2022. 

  • “The Efficiency of Financial Holding Companies in Korea,” (with Garam Ahn and Frederick Dongchuhl Oh), Korean Economic Review, 36(1), 29-58, 2020.

  • “Credit Ratings and Corporate Disclosure Behaviour: Evidence from Regulation Fair Disclosure in Korea,” (with Frederick Dongchuhl Oh), Applied Economics, 49(35), 3481-3494, 2017.