Annual Conference

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Economic Transformation of Asia, Senior Fellows/Fellows

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May 2016

Liquidity Rules and Credit Booms

Kinda Cheryl HACHEM, Zheng Michael SONG
China increased bank liquidity standards in the late 2000s. The interbank market became tighter and more volatile and credit soared, contrary to expectations. To explain this, we argue that shadow banking developed among Chinas small and medium-sized banks to evade the higher liquidity standards. Th...
Keywords: Liquidity regulation, Financial transformation, China
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Annual Conference

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Economic Transformation of Asia, Senior Fellows/Fellows

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May 2016

Just Do Your Job: Obedience, Routine Tasks, and the Pattern of Specialization

Davin CHOR, Filipe CAMPANTE
We study the interplay between cultural attitudes and the economic environment, focusing on attitudes towards obedience in the workplace. We establish two key stylized facts: First, at the country level, an upward shift in workplace obedience over time is associated with more exporting in industries...
Keywords: Culture, Workplace Obedience, Routine Tasks, Education, Human capital, Specialization Patterns, Exports
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Annual Conference

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Investment Finance

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May 2016

The Information in Asset Fire Sales

Sheng HUANG, Matthew C. RINGGENBERG, Zhe ZHANG
Asset prices remain depressed for years following mutual fund fire sales, but little is known about the causes of these price drops. We show that asymmetric information generates price pressure during fire sales. We separate trades into expected trades, which assume fund managers scale down their po...
Keywords: adverse selection, asymmetric information, fire sales, information economics, institutional investors, slow moving capital
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Annual Conference

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Investment Finance

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May 2016

Systemic Default and Return Predictability in the Stock and Bond Markets

Jack BAO, Kewei HOU, Shaojun ZHANG
We construct a measure of systemic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. Systemic default spikes during recessions, is correlated with macroeconomic indicators, and predic...
Keywords: systemic risk, Joint default, Predictability, Stock Returns, Bond returns
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Annual Conference

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Investment Finance

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May 2016

Option Return Predictability

Bing HAN, Jie CAO, Qing TONG, Xintong ZHAN
We uncover new return predictability in the cross-section of delta-hedged equity options. Expected returns to writing delta-hedged calls are negatively correlated with stock price, profit margin and firm profitability, but positively correlated with cash holding, cash flow variance, new shares issua...
Keywords: Cross-section of equity options, delta-hedged options, return predictability, stock characteristics, option factor model
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