Disclosing Share Repurchase More Frequently? with Mao Ye and Feng Zhang
Presentations: Cornell, CUHK, PolyU HK, CityU HK, University of Cincinnati, CMU, CUHK (Shenzhen), HKUST (Guangzhou), 8th World Symposium on Investment Research, 9th CCER SI, 2025 China Fintech Research Conference, UBC Summer Finance Conference 2025
Abstract: In response to the exponential growth of share repurchases, the SEC adopted a rule in May 2023 requiring firms to disclose realized repurchases on a daily rather than quarterly basis. The rule was later vacated following legal challenges. We show both theoretically and empirically that more frequent disclosure increases—rather than decreases—share repurchase activity. Disclosure reduces information asymmetry and the price impact of repurchases, lowering the marginal cost of buying additional shares and incentivizing firms to repurchase more. At the same time, firms oppose increased disclosure because it leads to price jumps and raises the average cost of repurchases.
Asset Pricing and Portfolio Adjustment under Supply Shocks with Mao Ye, Chen Yao, and Shidong Shao
2025 FMA Semi-Finalist; Previously known as "Supply-based Asset Pricing"
Presentations: 2025 ESADE Spring Workshop, 2025 CICF, Stockholm Business School, Vienna Graduate School of Finance, 9th CCER SI, 2025 China Fintech Research Conference, 2025 SAFE Asset Pricing Workshop, Universitu of British Columbia, 2025 FMA, Market Microstructure Exchange, 2025 CUHK-RAPS Conference, Singapore Management University, Tsinghua University, FIRS 2026
Abstract: This paper provides the first estimate of the price impact of exogenous changes in shares supply and shows how investors adjust portfolios to such shocks. We find that a 1% uninformed reduction in shares outstanding lowers stock prices by 2.6%. Our identification exploits a rare Randomized Controlled Trail in the equity market: the 2016 SEC Tick Size Pilot (TSP). Although treatment and control firms announced similar repurchase programs, treatment firms repurchased 22% fewer shares, a difference unanticipated by both managers and the market. This reduction stems from an unexpected conflict between the pilot and repurchase regulations. The unshocked control stocks allow us to control for price spillovers and identify a relative price multiplier. We further show that when a stock’s idiosyncratic risk dominates its systematic risk exposure, this relative price multiplier empirically approximates the stock’s own-price multiplier. Investment advisors and mutual funds absorb most of the supply shocks, followed by banks and other 13F institutions, whereas pension funds and insurance companies show little response. Households initially absorb the supply shocks but gradually decrease their holdings by selling shares to other investors after the fourth pilot quarter. The sizable uninformed price impact constrains managers' ability to repurchase undervalued equity and provides a new perspective on the long-run abnormal returns following repurchase announcements.
Informed Trading in Parallel Market with Dong Lu and Biao Guo
Revisiting the optimal insurance design under adverse selection: distortion risk measures and tail-risk overestimation, with Zhihang Liang and Wenjun Jiang, Insurance: Mathematics and Economics, Vol 104: 200-221, 2022.
Abstract: This paper studies the design of optimal insurance from an insurer’s perspective when it is subject to adverse selection issue. Different from the literature, the insureds who are exposed to different types of risks are allowed to apply different preference measures. By assuming that the insureds’ preferences are dictated by some distortion risk measures that always over-estimate the tail risk, we figure out the optimal policy menu without assuming the parametric form of indemnity functions. We also find that the insureds who deem their losses riskier than those of others will always purchase full insurance, which is consistent with the results in past studies. Furthermore, we show that in the presence of adverse selection the optimal policy menu always outperforms the optimal single policy in the sense that the former can yield a larger expected profit for the insurer. This outcome also echoes some existing results in the literature.