1. The Impact of ETFs on Pricing of Underlying Assets with Charles Trzcinka
2025 SGF Best Paper Award
ETFs attract traders away from investing in underlying assets due to their low trading costs. This paper investigates the impact of this shift on the information efficiency of the underlying assets. Specifically, we explore how the increasing popularity of ETFs prompts active mutual fund managers to execute informed trades that generate alpha. Using trade-level data, we test whether trades by skilled active managers more accurately
predict future abnormal stock returns as ETF ownership in these stocks rises. By leveraging the annual reclassification of stocks from the Russell 1000 to the Russell 2000 as an exogenous variation, we find that high-performing mutual funds can mitigate the excess volatility typically associated with ETFs.
2. Investing Like My Parents: Do Parents Affect Children's Risk Taking Behavior? with Min Cui
We show that learning from parents explains heterogeneity in financial decisions later in life. Using parents’ stock market experiences before parenthood as instrumental variables for parents’ stock market decisions, we show that parents' participation and risk-taking positively affects children's stock market decisions. More importantly, exploiting a finding that parents spend more quality time daily with their first child, we find that this parental effect is mainly driven by learning from parents through one's childhood interactions with parents. We also examine the wealth outcomes implied. Our results contribute to the understanding of how family traits passed down over generations could lead to wealth inequality across families.
3. The Chinese Trading Halt Puzzle with Crocker Liu and Charles Trzcinka
Chinese firms have the right to initiate trading halts with 42% of halts occurring after a price increase. We hypothesize and confirm that the reason halts occur after a price rise is to increase the information in price vis-a-vis increasing the signal to noise ratio. Halts following a price rise also add more value relative to a price decline. However, this option increases the cost of capital by 121 basis points. We show that price non-synchronicity, institutional ownership, accounting and microstructure variables predict a trading halt and explain the positive CARs after a halt. We find that halts attract mutual funds.
4. Revisiting Active Mutual Fund Managers' Skills: New Evidence on the Expertise of Active Fund Managers
I examine whether mutual fund managers' investment performances and choices are related to the focus of their education, especially to their major. With novel data from a professional networking website, I find that mutual fund managers perform better in industries related to their majors and they overweight those major-related industries. When a mutual fund experiences a manager turnover, the fund's new manager overweights industries related to his own education instead. This effect can not be explained by network effects or alumni networking. The findings provide important implications of where mutual fund managers can gain skills and how managers can generate value for investors through their expertise.
5. The Value of Investor Trading Data: Evidence From an Experiment with Francois Longin and Roxana Mihet
2025 SGF Best Paper Award
ETFs attract traders away from investing in underlying assets due to their low trading costs. This paper investigates the impact of this shift on the information efficiency of the underlying assets. Specifically, we explore how the increasing popularity of ETFs prompts active mutual fund managers to execute informed trades that generate alpha. Using trade-level data, we test whether trades by skilled active managers more accurately
predict future abnormal stock returns as ETF ownership in these stocks rises. By leveraging the annual reclassification of stocks from the Russell 1000 to the Russell 2000 as an exogenous variation, we find that high-performing mutual funds can mitigate the excess volatility typically associated with ETFs.
2. Investing Like My Parents: Do Parents Affect Children's Risk Taking Behavior? with Min Cui
We show that learning from parents explains heterogeneity in financial decisions later in life. Using parents’ stock market experiences before parenthood as instrumental variables for parents’ stock market decisions, we show that parents' participation and risk-taking positively affects children's stock market decisions. More importantly, exploiting a finding that parents spend more quality time daily with their first child, we find that this parental effect is mainly driven by learning from parents through one's childhood interactions with parents. We also examine the wealth outcomes implied. Our results contribute to the understanding of how family traits passed down over generations could lead to wealth inequality across families.
3. The Chinese Trading Halt Puzzle with Crocker Liu and Charles Trzcinka
Chinese firms have the right to initiate trading halts with 42% of halts occurring after a price increase. We hypothesize and confirm that the reason halts occur after a price rise is to increase the information in price vis-a-vis increasing the signal to noise ratio. Halts following a price rise also add more value relative to a price decline. However, this option increases the cost of capital by 121 basis points. We show that price non-synchronicity, institutional ownership, accounting and microstructure variables predict a trading halt and explain the positive CARs after a halt. We find that halts attract mutual funds.
4. Revisiting Active Mutual Fund Managers' Skills: New Evidence on the Expertise of Active Fund Managers
I examine whether mutual fund managers' investment performances and choices are related to the focus of their education, especially to their major. With novel data from a professional networking website, I find that mutual fund managers perform better in industries related to their majors and they overweight those major-related industries. When a mutual fund experiences a manager turnover, the fund's new manager overweights industries related to his own education instead. This effect can not be explained by network effects or alumni networking. The findings provide important implications of where mutual fund managers can gain skills and how managers can generate value for investors through their expertise.
5. The Value of Investor Trading Data: Evidence From an Experiment with Francois Longin and Roxana Mihet
