CV (Feb. 2020)
Primary Research Interests
- Financial intermediaries
- Empirical asset pricing
- International finance
My research interests are mainly on how financial intermediaries, such as mutual funds, banks and insurance companies, affect asset prices and real economy. In particular, my current research focuses on understanding 1) how mutual funds matter for the equilibrium stock returns and 2) how global bank loan supply affects real activity of firms crowded out in a small open economy.
Ph.D. in Finance, M.Res. in Finance, London Business School, 2019
M.S. in Statistics, University of Chicago, 2012
B.B.A. in Business Administration, B.A. in Education, Korea University, 2010
+61 (0)3 8344 6408
This paper studies how mutual funds- as the largest investor in stock market- matter for the equilibrium stock returns. Unlike direct household investors, fund managers face a distinct risk as an investment intermediary, namely fund flow risk: Fund flows are uncertain to managers, affect managers’ income, and may force managers to liquidate their asset holdings. In an equilibrium model with fund mangers, this paper shows that aggregate shocks to fund flows enter the stochastic discount factor (SDF) in addition to the aggregate market returns. Empirically, the implied SDF explains the average returns of 50 size, book-to-market, liquidity, and flow risk portfolios jointly and separately. In fact, the aggregate shocks to fund flows subsume explanatory power of the aggregate market returns across different model specifications. Moreover, the magnitude of the price of risk for the aggregate shocks to fund flows is very similar across the different sets of test assets, supporting the prediction that the aggregate shocks to fund flows are an important component of the SDF in stock market.
2. "Foreign Credit Supply and Crowding Out in a Small Open Economy" 2020
During foreign bank loan outflows, aggregate investment and employment relative to GDP decline at a sharper rate in emerging economies than in advanced economies. This paper studies how the supply of foreign bank loans affects debt financing and subsequently real investment and employment of non-financial firms in 70 different countries using company-level data. In particular, I explore if the real effects of foreign loan supply differ for the firms that are crowded out from local debt markets. For identification, I use detailed bank-firm level syndicated loan data that captures lending from foreign banks and local banks, supplemented with firms’ bond issuances, investment and employment. I exploit Lehman Brothers bankruptcy as a shock to a bank's health during 2008 financial crisis, measured by change in the number of loans made by the bank to all firms during the crisis relative to the pre-crisis period. To isolate supply effects, I show that, for a given firm borrowing from multiple banks, a change in the loan amounts from each bank is strongly correlated with the bank’s health, controlling for the firm specific change before and during the crisis. I then instrument the bank’s health using the pre-crisis share of the revolving facilities co-syndicated with Lehman Brothers. Using the instrument, I find that firms with a high share of foreign bank loans do not decrease debt financing, real investment, and employment as much as firms with a low share of foreign bank loan during the negative foreign loan supply. This points to a mechanism in which firms with a high foreign loan share substitute with local loan or bond financing at the expense of firms with a low foreign loan share who are crowded out from the local debt market. I also explore if a larger share of firms are crowded out in the emerging market economy than in the advance economy during the negative foreign loan supply.