Working Papers


Abstract: This paper documents that mutual fund managers who experience distress in one fund subsequently take on more risk in other funds they manage. Specifically, portfolio managers actively reallocate more stocks with higher systematic risk and lottery-like features in their linked funds. This increased risk-taking appears to be primarily motivated by managers' compensation contracts and is value-destroying for fund investors. The response to the distress shock is smaller for portfolio managers with long-term incentive compensation contracts, longer-tenured managers, and female managers. These results highlight fund spillover effects through common portfolio managers and agency conflicts in the mutual fund industry.

with Xing Huang,  Ohad Kadan, and Jimmy Wu

Abstract: This paper studies the role of race and ethnicity in the investment decisions of mutual fund managers and mutual fund investors. Mutual funds managed by a white-dominant team account for more than 90% of all funds. Such funds invest a smaller proportion of their portfolios in firms led by minority CEOs compared to funds managed by a minority-dominant team. Fund managers do not deliver superior performance on equity holdings for which the CEO's race coincides with their own, suggesting no race-related informational advantage. Considering flow-performance sensitivity, we find that funds managed by a minority-dominant team are equally penalized when they perform poorly but are not rewarded as much for superior performance as white-dominant funds. Our results uncover the differential treatment of minority-led funds and firms by investors.

with Matteo CrosignaniMarco Macchiavelli, and Andr´e F. Silva

Abstract: Amid the current U.S.-China technological race, the U.S. has imposed export controls to deny China access to strategic technologies. We document that these measures induced sizable losses on U.S. suppliers and prompted a broad-based decoupling of U.S. and Chinese supply chains. Once their Chinese customers are added to the export control list, U.S. suppliers experience negative abnormal stock returns, wiping out $130 billion in market capitalization, as well as a drop in profitability and employment. These suppliers are also more likely to terminate relations with Chinese customers, including those not targeted by export controls. We find no evidence of reshoring.

Investors'  Responses to Market Fluctuations: Evidence from Experiments and Real Tradings  

with Xuan Luo and Shumiao Ouyang 

Abstract:  This paper examines how individual investors respond to the market price fluctuations, using unique individual-level transaction data from a trading experiment and the same individuals' real trading history on the Alipay app. We find that, in response to exogenous price movements in the experiment, investors tend to be contrarian traders. Sophisticated investors tend to be more contrarian than the less sophisticated ones. We further document that investors' real trading styles can be highly predicted with their behaviors in the experiment. The results imply that investors use simple heuristics from the price movements when they make investment decisions in the real world.