Research
WORKING PAPERS
Price Multipliers are Larger for Less Diversifiable Order Flows with Zihan Lin
Conditionally Accepted @ Journal of Finance
Takeaway: traditional notions of diversifiability are relevant for the cross-section of demand effects. Specifically, we show that the 'price multiplier' -- the elasticity of prices to shares demanded -- forms a gradient that increases with the degree of systematic risk.
Endogenous Elasticities: Price Multipliers Are Smaller for Larger Demand Shocks with Aditya Chaudhry
R&R @ Review of Financial Studies
- Mid-Atlantic Research Conference in Finance Outstanding Paper Award
- Consistent replication in other markets: 401(k)-based shocks and corporate bonds
- Presentations: UVA McIntire, Demand in asset markets working group, OSU, Mid-Atlantic Research Conference in Finance, NFA, HKU, Hong Kong Polytech, Stanford SITE, UNC Junior Conference, NYU Stern Workshop for Assistant Professors, NBER asset pricing, Princeton, MFA
- Coverage in The Grumpy Economist
Takeaway: the marginal stock price impact declines with the magnitude of demand, consistent with the idea that arbitrage forces are stronger for larger price dislocations.
Dissecting the Aggregate Market Elasticity with Victor Duarte, Goutham Gopalakrishna, Mahyar Kargar, and Dejanir Silva
Presentations: UIUC, UCLA, Wabash Finance Conference, St Louis Fed, European Summer Symposium in Financial Markets, University of Zurich, AFA, NBER summer institute
Takeaway: A general-equilibrium model of the aggregate market elasticity with heterogeneous investors, passive investors, and financial constraints.
Performance-Based Attrition and Decreasing Returns to Scale with Min Zhu
Working paper
Presentations: University of Quebec at Montreal
Takeaway: Popular estimates of decreasing returns to scale for active mutual funds is too high. We propose a new approach to estimate it. Based on the updated estimates, the quantitative explanatory power of Berk-Green (2004) mechanism is tempered.
On the Recovery of Demand Elasticities in Dynamic Setting with Carter Davis, Mahyar Kargar, and Dejanir Silva
Presentations: Duke asset pricing, CMU, NBER LATM, WFA, SFS Cavalacde, UCLA
Takeaway: provides a methodology to empirically uncover investor demand functions in dynamic environments.
How Much of Cross-Stock Momentum Reflects Underreaction? with Jingda Yan
Presenetations: Monash, University of Queensland, NJIT, NYU Shanghai, Fudan, ANU, Purdue, U Washington, UCSD, NUS, Singapore Management University, SHUFE, ShanghaiTech
Takeaway: the cross-stock momentum lead-lag effects, such as that in Cohen and Frazzini (2008), are not all due to investor underreaction.
PUBLISHED PAPERS
Why Do Portfolio Choice Models Predict Inelastic Demand? with Carter Davis and Mahyar Kargar
Journal of Financial Economics, 2025
Takeaway: classical portfolio choice models predict unrealistically high demand elasticities due to assuming that 1) price dislocations revert quickly and 2) securities are highly substitutable. The latter is the most quantitatively important.
Discontinued Positive Feedback Trading and the Decline of Return Predictability with Itzhak Ben-David, Andrea Rossi, and Yang Song
Journal of Financial and Quantitative Analysis, 2024
Takeaway: Exogenous changes in investor demand patterns can lead to long-term changes in the profitability of stock factors.
Media Coverage: Wall Street Journal, Alpha Architect, and Morningstar
Attention Constraints and Financial Inclusion with Bo Huang, Tse-Chun Lin, Mingzhu Tai, and Yiyuan Zhou
Journal of Financial and Quantitative Analysis, 2024
Takeaway: when loan officers are under tighter time constraints, they endogenously become more discriminatory: they spend less time reviewing applicants from low socioeconomic backgrounds and reject them more frequently.
Retail Bond Investors and Credit Ratings with Ed deHaan and Edward Watts
Journal of Accounting and Economics, 2023
Takeaway: retail investors in corporate bonds over-rely on credit ratings and bond yields to make investment decisions to their detriment.
What Do Mutual Fund Investors Really Care About? with Itzhak Ben-David, Andrea Rossi, and Yang Song
Review of Financial Studies, 2022
Takeaway: mutual fund investors --- who are predominantly retail --- use simple signals (e.g. Morningstar ratings, past returns) to guide their investments. They do not use the CAPM. It is also hard to interpret flow-performance sensitivity as all about 'learning about fund manager skill' because we see similar patterns in passive and index funds.
Media Coverage: Yahoo! Finance, ETF.com, Alpha Architect, Columbia Law School Blue Sky Blog
Ratings-Driven Demand and Systematic Price Fluctuations with Itzhak Ben-David, Andrea Rossi, and Yang Song
Review of Financial Studies, 2022
Takeaway: using an exogenous shock, we show that uninformed demand can cause large-scale factor/style-level stock price fluctuations.
What Drives the Size and Value Factors?
Review of Asset Pricing Studies (Editor's Choice), 2022
- WFA Cubist Award for Outstanding Ph.D. Research
- Review of Asset Pricing Studies Rising Star Award
Takeaway: 30% of size and value factor price fluctuations are driven by style-level fund flows.
Endogenous Inattention and Risk-Specific Price Underreaction in Corporate Bonds
Journal of Financial Economics, 2022
Takeaway: corporate bond investors pay more attention to risks that are more payoff-relevant (salient), consistent with theories of endogenous inattention.