Working Papers
Working Papers
Presented at FIRS 2025, ANU, and UQ seminar
Abstract:
This paper constructs dynamic networks of institutional funds based on investors’ revealed preferences, captured through co-viewership on a leading asset management platform. Shocks to peer funds—identified solely through shared investor attention—predict subsequent returns and flows of focal funds, above and beyond the effects of overlapping stock holdings, style similarity, and textual similarity in fund prospectuses. Consistent with limited investor attention, these spillover effects are sluggish and amplified for connections that investors tend to overlook. Fund managers actively respond to negative spillovers by rebalancing portfolios away from attention-linked peers. In contrast, idiosyncratic peer shocks—such as key manager departures—generate positive inflows to attention-linked funds. The findings reveal an investor attention-based channel of shock propagation across institutional funds, with important implications for diversification across multiple fund managers and the stability of the sector.
With more than $40 trillion dollars under management, institutional fund investors play an important role in the financial market. Using novel viewership data, we are the first to examine how they allocate attention to specific institutional funds. Using several instruments based on screen display features on the fund data platform, we provide causal evidence that their attention drives flows to institutional funds and exerts positive price pressure on their underlying stocks. Overall, our evidence suggests that even sophisticated institutional fund investors suffer from limited attention, which has important asset pricing implications.
"Learning from peers: The real effects of mutual funds’ stock selections," with Ying Dou and Emma Jincheng Zhang
Abstract:
Initial purchase positions by skilled fund managers in a firm signal their conviction not only in the firm but also in its industry, making industry valuation more informative. Upon observing these signals, a firm’s sensitivity of investment to industry Q increases by 8.4%. Unskilled fund managers’ signals exhibit insignificant effects, suggesting that the information source matters for learning. The learning process involves intensified searching of other firms’ SEC filings and reallocation of internal resources. After skilled fund managers quickly liquidate their initial positions, corporate investment also reverses. Our findings suggest that the real effects of skilled fund managers’ stock selection extend beyond their portfolio firms.
Using novel data on global asset managers, this study investigates the asset pricing factors that guide global fund flows. Among the prominent models assessed, the Capital Asset Pricing Model (CAPM) emerges as the most influential in predicting global fund flows. These results are primarily driven by institutional investors, rather than high-net-worth individuals, although all investor types do not seem to use sophisticated benchmarks. The prevalent use of the CAPM leads to correlated demand, which positively predicts stock returns in the short term but reverses in the long term. Our findings suggest that the CAPM remains an important model after all.
Inactive working papers:
"Were stay-at-home orders during Covid-19 harmful for business? The market’s view" with Chen Chen, Sudipto Dasgupta, and Ying Xia.
We study the market reactions following staggered implementations of lockdowns across U.S. states during Covid-19. We find that returns on firms located in lockdown states are higher following the lockdown. We interpret these market reactions as reflecting updated beliefs of market participants in the light of events that follow the lockdowns, such as compliance with stay-at-home orders. The effect is (a) concentrated among counties with a high number of infections, (b) larger for firms in essential industries, and (c) larger for Democratic states. These findings suggest that the market perceives Non-Pharmaceutical Interventions, when effective, to be beneficial for businesses.