1. Do regulations work? Experimental Evidence on Price Limits and Trading Restrictions in Asset Markets with Deterministic and Stochastic Fundamental Values (w/ Kenan Kalayci, Andreas Leibbrandt & Carlos Oyarzun)
Published in Journal of Economic Behavior & Organization
Abstract We examine how traders react to two prominent stock market regulations. Under a constant fundamental value (FV) process, price limits and trading restrictions abate bubbles when traders are inexperienced, but inhibit price adjustments when traders gain experience. Under a Markov-process FV, these regulations always increase mispricing. Traders underreact to market news when the FV increases and do not react when the FV decreases. We find evidence of momentum trading and the delayed price discovery hypothesis of price limits. These findings emphasize stress-testing asset market interventions and suggest that price limits and trading restrictions do more harm than good.
2. Shadow Banking in a Crisis: Evidence from FinTech During COVID-19 ( w/ Difang Huang)
Published in Journal of Financial and Quantitative Analysis
Abstract We analyze lending by traditional as well as FinTech lenders during COVID-19. Comparing samples of FinTech and bank loan records across the outbreak, we find that FinTech companies are more likely to expand credit access to new and financially constrained borrowers after the start of the pandemic. However, this increased credit provision may not be sustainable; the delinquency rate of FinTech loans triples after the outbreak, but there is no significant change in the delinquency of bank loans. Borrowers holding both loan types prioritize the payment of bank loans. These results shed light on the benefits provided by shadow banking in a crisis and hint at the potential fragility of such institutions when delinquency rates spike.
Media coverage: VoxChina
3. Reform scientific elections to improve gender equality ( w/ Difang Huang)
Published in Nature Human Behaviour
Abstract Women are underrepresented in prestigious science roles in many countries. They shy away from recruitments for leading positions in scientific academies and are less likely to succeed conditional on entry due to reasons unrelated to scientific merit. Reform of election procedures is needed to provide a more gender-neutral environment in the science world.