Useful Links

Published papers:

  • “The Customer Knows Best: The Investment Value of Consumer Opinions,”, forthcoming in the Journal of Financial Economics (2017). [Download] [Internet Appendix]
    - Featured in the Wall Street Journal, Oxford Business Law Blog, and HFM Week
    Using a dataset of over 14.5 million customer product reviews on Amazon.com, I find evidence that consumer opinions contain information for stock pricing. A strategy based on customer ratings delivers an abnormal return of about 56-73 basis points per month. There is no evidence of return reversals in the subsequent year. I also find that abnormal customer ratings positively predict revenues and earnings surprises.These results suggest that consumer opinions contain novel information about firms' fundamentals and stock pricing.

  • Product Market Competition in a World of Cross Ownership: Evidence from Institutional Blockholdings,” with Jie (Jack) He, forthcoming in the Review of Financial Studies (2016). [Download]
    We examine whether and how institutional cross-ownership of same-industry firms affects product market behavior and performance. We find evidence suggesting that cross-ownership by institutional blockholders offers strategic benefits by fostering product market coordination. We establish causality by relying on a difference-in-differences approach based on the quasi-natural experiment of financial institution mergers.

  • Capitalizing on Capitol Hill: Informed Trading by Hedge Fund Managers,” with Meng Gao, Journal of Financial Economics 121 (2016), 521-545. [Download] [Internet Appendix]
    We examine the hypothesis that hedge funds obtain an informational advantage in securities trading through their connections with lobbyists.  We find that connected hedge funds tend to trade more heavily in politically sensitive stocks, and they perform significantly better on politically sensitive positions than non-political positions..

  • “Institutional Investors and the Information Production Theory of Stock Splits,” with Thomas Chemmanur and Gang Hu, Journal of Financial and Quantitative Analysis 50 (2015), 413-445. [Download]
    We use transaction-level institutional trading data to test an extended version of Brennan and Hughes' (1991) information production theory of stock splits. We show that institutional brokerage commissions increase significantly after a split, thereby providing an incentive for brokerage houses to produce information about the splitting stock. We further show that brokerage houses produce more information and that institutional trading becomes more informative post-split.

  • “Gender and Corporate Finance: Are Male Executives Overconfident Relative to Female Executives?” with Darren Kisgen, Journal of Financial Economics 108 (2013), 822-839. [Download]
    We study corporate financial and acquisition decisions made by female executives compared to male executives. We find evidence consistent with male executives being overconfident relative to female executives

  • “The Role of Institutional Investors in Initial Public Offerings,” with Thomas Chemmanur and Gang Hu, Review of Financial Studies 23 (2010), 4496-4540. [Download]
    We use a proprietory institutional trading dataset to examine the role of institutional investors in IPOs. We find that institutional investors possess a significant informational advantage in IPOs, are able to realize significant profits from their participation in IPOs, and play a supportive role in the IPO aftermarket.

Working papers:

  • “Internalizing Governance Externalities: The Role of Institutional Cross-ownership,” with Jie (Jack) He and Shan Zhao, May 2017. [Download]
    - Accepted for presentation at the 2017 WFA (Whistler, BC, Canada) and 2017 CICF (Hangzhou, China).
    We study the role of institutional cross-ownership in internalizing corporate governance externalities using data on mutual fund proxy voting. Exploiting the variation in cross-ownership across institutions for the same firm at the same time as well as the variation in cross-ownership across firms within the same institution’s portfolio, we show that an institution’s holdings in peer firms increase the likelihood that the institution votes against management in shareholder-sponsored governance proposals.

  • “All the President's Friends: Political Access and Firm Value,” with Jeffrey Brown, April 2017. [NBER Working Paper No. 23356]
    - Featured in The Economist, Wall Street Journal, Politico, Fortune, CNBC, Washington Examiner, and Bloomberg (1, 2).
    - Accepted for presentation at the 2017 Political Economy of Finance conference (Stigler Center at Chicago Booth).
    Using novel data on White House visitors, we find that corporate executives’ meetings with key policymakers are associated with positive abnormal stock returns. We also find evidence suggesting that following meetings with federal government officials, firms receive more government contracts and are more likely to receive regulatory relief. The investment of these firms also becomes less affected by political uncertainty after the meetings. Overall, our results provide evidence suggesting that political access is of significant value to corporations.

  • “Informing the Market: The Effect of Modern Information Technologies on Information Production,” with Meng Gao, April 2017. [Coming soon]
    - Accepted for presentation at the 2017 CICF (Hangzhou, China).
    Using the staggered implementation of the EDGAR system in 1993-1996 as a shock to information dissemination technologies, we find evidence that modern information technologies increase information production by corporate outsiders. Specifically, trades by individual investors in a stock become more informative about future stock returns after the stock becomes subject to mandatory filing on EDGAR. This effect is driven primarily by investors who have access to the internet. There is evidence that the amount and accuracy of information produced by sell-side analysts increase following the EDGAR implementation. Market responses to analyst revisions also become stronger after firms become EDGAR filers.

  • “Pollution and Performance: Do Investors Make Worse Trades on Hazy Days?” with Nianhang Xu and Honghai Yu, September 2016. [Download]
    We explore the relation between air pollution and trading performance of stock investors. Using a sample of trades by over 100,000 investors from 28 cities in China, we find a negative relation between air pollution and trade performance. Our calendar-time portfolio tests show that the trades made by investors on days with poor air quality underperform those made on days with good air quality by 0.612 to 0.673 basis points per day at the average investment horizon of 40 trading days. Our results highlight a hitherto unexplored cost associated with ambient air pollution, namely underperformance of stock market investors.

  • Shareholder Coordination and the Market for Corporate Control,” September 2015. [Download]
    - Presented at the 2012 WFA (Las Vegas), the 2011 Financial Intermediation Research Society (FIRS) Annual Conference (Sydney, Australia), the 2011 China International Conference in Finance (CICF), and the CGIO Academic Conference (Singapore).
    I examine the impact of shareholder coordination on the market for corporate control. I construct two measures to capture the ease of shareholder coordination, one based on the geographic proximity among institutional shareholders and the other based on the correlation in their portfolio allocation decisions. I find that target firms with greater ease of shareholder coordination experience significantly higher abnormal returns around the takeover announcement. In a similar vein, acquirer firms with greater ease of shareholder coordination are associated with higher acquisition announcement returns. Using the SEC's 1992 proxy reform as an exogenous shock that reduces barriers to shareholder coordination, I find that these effects are absent in the pre-reform period and become particularly pronounced in the post-reform period.

  • “Dynamic Liquidity Preferences of Mutual Funds,” April 2013. [Download]
    - Presented at the 2009 AFA (San Francisco), 2008 EFA (Athens, Greece), and 2008 Singapore International Conference on Finance.
    Using datasets on mutual fund holdings and actual trades, I find evidence that mutual fund managers tilt their portfolios more heavily towards liquid assets, such as cash and liquid stocks, during times when expected market volatility is high. I further show that such dynamic behavior contributes to superior performance in mutual funds.

  • “Shareholder Coordination, Corporate Governance, and Firm Value,” October 2015. [Download]
    - Presented at the 2012 Rothschild Caesarea Center Annual Academic Conference (Herzliya, Israel) and the 2012 Financial Intermediation Research Society (FIRS) Annual Conference (Minneapolis), and the 2012 EFA (Copenhagen).
    I examine the impact of the ease of coordination among institutional shareholders on corporate governance and firm value. I find that the ease of coordination among institutional shareholders is positively associated with firm value. To establish causality, I use mergers of asset management firms and the 1992 proxy reform to identify exogenous shocks to shareholder coordination. I find evidence suggesting that the ease of coordination improves firm value by enhancing the governance role of institutional investors. 

  • “Hedge Funds and Shareholder Wealth Gains in Leveraged Buyouts,” May 2010. [Download]
    - Presented at the 2010 EFA (Frankfurt).
    I examine the role of hedge funds in LBOs. I find that hedge funds play the role of protecting target shareholder interests in LBOs, especially deals with a high potential for expropriation by target managers and private equity bidders.