Two Articles Accepted for Publication in Top Three Finance Journals

The Trade Imbalance Network and Currency Returns

Ai Jun Hou coauthored a paper with Lucio Sarno (University of Cambridge, UK) and Xiaoxia Ye (University of Nottingham, UK), which has been accepted at the Journal of Financial Economics.

Short description:
In this paper, the authors extend Gabaix and Maggiori (2015) by incorporating a trade imbalance network into intermediaries’ balance sheets using Leontief centrality. In a multi-country setting, they show that currency risk premia reflect financiers’ risk-bearing capacity. Guided by theory, they construct a Centrality-Based Characteristic (CBC) from network centrality and return covariances. Sorting on CBC yields high Sharpe ratios and reveals a novel source of return predictability.

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Career Concerns, Short-Termism, and Real Options: The Case of Delegated Money Management

Ran Xing, coauthored a paper with Jules van Binsbergen, Jungsuk Han, and Hongxun Ruan, which has been accepted at the Journal of Finance.

Short description:
In this paper, the authors develop and calibrate a dynamic equilibrium model to show how investment managers strategically choose investment horizons to manage career concerns related to skill revelation. New managers favor short-term strategies to accelerate skill revelation, driving down the profitability of short-term opportunities in equilibrium, while a few skilled and established managers pursue scalable long-term opportunities - a pattern confirmed with US mutual fund data.

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