Annual Conference

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Trade, Growth and Development

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May 2024

Trade and Technology Compatibility in General Equilibrium

Weili CHEN, Jingting FAN, Wenlan LUO
We develop a model of endogenous production networks in which the horizontal proximity between a firm’s technology and the technology of its suppliers affects the input cost. Firms choose their technology balancing the benefit of moving in the technological space toward suppliers with the cost of ...
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Annual Conference

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Trade, Growth and Development

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May 2024

Labor Market Integration and Entrepreneurship

Wei LIN, Hanming FANG, Siyang LI
This paper investigates the impact of various labor market integration policies on the migration decisions of entrepreneurs and the performance of their firms, in the context of China’s Hukou policies. We first present suggestive evidence that various Hukou policies have significant and heterogene...
Keywords: Hukou Reform, Internal Migration, Entrepreneurship, Sorting
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Annual Conference

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Investment Finance

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May 2024

Do Investors Overvalue Startups? Evidence from the Junior Stakes of Mutual Funds

Vikas AGARWAL, Brad BARBER, Si CHENG, Allaudeen HAMEED, Harshini SHANKER, Ayako YASUDA
We show that mutual funds report their junior stakes in startups at 43% higher valuation than model fair values that consider multi-tier capital structures of startups. The latest-issued and most senior security is worth 48% more per share than junior securities held by mutual funds, implying that m...
Keywords: Startup financing, Startup valuation, Mutual funds, Venture capital, Fair value, Private valuation
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Annual Conference

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Investment Finance

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May 2024

The Low Frequency Trading Arms Race: Machines Versus Delays

Alexander DICKERSON, Yoshio NOZAWA, Cesare ROBOTTI
We propose a novel framework to compute transaction costs of trading strategies using infrequently traded assets. The method explicitly accounts for the trade-off between bid-ask spreads and execution delays. The benefit of waiting for a better trading opportunity with lower bid-ask spreads is partl...
Keywords: Corporate Bonds, Liquidity, Machine-Learning, Market Efficiency, Fixed-Income Securities, Credit Risk
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Annual Conference

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Investment Finance

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May 2024

Equity Lender Base and Limits to Arbitrage

Xi DONG, Qifei ZHU
Using new data on mutual funds’ equity lending positions, we find that short sellers borrow shares from a small set of repeated lenders and the composition of lenders differs from stock to stock. We argue that this fragmented, persistent lender base is driven by investors’ inelastic lending supp...
Keywords: Limits to Arbitrage, Equity Lending, Short Selling, Mutual Funds
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