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Working Papers
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Fund Flows, Liquidity, and Asset Prices
Solo-authored.
Management Science, Reject and Resubmit.
Presentations (selected): WFA 2020; Young Scholars Finance Consortium 2019 at Texas A&M; Fed Board 2019.
Summary (empirical): In the presence of mutual funds, a novel liquidity risk arises in equilibrium, i.e., the co-movement of liquidity costs with aggregate fund flow shocks, which earns a significant risk premium in corporate bonds, under unique identification strategies feasible in the bond market. The liquidity beta on flows is highly heterogeneous even among bonds from the same firm, partly due to funds' forced sales interacting with liquidity costs.
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Short of Cash? Convex Corporate Bond Selling By Mutual Funds and Price Fragility
Co-author: Oliver Randall.
Review of Finance, Revise and Resubmit.
Presentations (selected): Australian National University 2021; Fed Board 5th Short-Term Funding Markets Conference 2022.
Summary (theoretical and empirical): Mutual funds' corporate bond selling and bond returns are convex in cash shortfall, i.e., outflow in excess of cash, while Treasury selling is closer to linear due to dual effects of cash shortfall: a higher cash shortfall today increases both the expected future shortfall and liquidity costs.
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Hidden Duration: Interest Rate Derivatives in Fixed Income Fund
Co-authors: Jaewon Choi and Oliver Randall
Presentations (selected): Fed Atlanta & GSU Workshop 2023, CFTC 2024, ESMA 2024, Fama-Miller Center Conference at Chicago Booth 2024, BI-SHoF 2024, AFA 2025.
Media: Risk.net.
Summary (empirical): Actively managed fixed income mutual funds carry significant duration risk from their use of interest rate derivatives (IRDs), with substantial variation in the duration of IRDs, both across funds and over time.
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Short-Run Income Shocks and Long-Run Distortions in Household Investments (draft available upon request)
Co-authors: Sehoon Kim, Yoon Lee, and Hoonsuk Park.
Presentations (selected): Boulder Summer Conference on Consumer Financial Decision Making 2024.
Summary (empirical): Using detailed bank transactions data, we show that short-run income shocks, identified by transitory unemployment shocks, can create surprisingly long-run distortions in household investment behavior, preventing a return to pre-shock brokerage investment levels even after full income recovery.
Publication in Policy Research
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Liquidity Shocks and Pension Fund Performance: Evidence from Early Access
Co-authors: James Brugler and Zhuo Zhong.
Australian Journal of Management, Forthcoming.
Media: Australian Financial Review; The Australian; Financial Standard.
Summary (empirical): We study how expectations of fund flows causally affect fund performance by exploiting a quasi-natural experiment in the Australian pension system where an unexpected policy change temporarily allowed fund withdrawals from a prespecified date in the future.
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