Home Address:
  420 Temple Street Room 235
  New Haven, CT. 06511

Telephone: (203) 6456745

Asset Pricing: pricing anomalies, inter-temporal behavioral of volatilities
Financial Accounting: dissemination of accounting information into asset prices
Market Microstructure: liquidity, volatility estimation using high frequency data
Probability and Statistics: stochastic control, quadratic variation measures and realized volatility

Asset Pricing (Theory and Empirical)
Corporate Finance and Market Microstructure

"Stock Return Dynamics under Earnings Management"

Matthew Spiegel (Chair)
Peter C.B. Phillips (Co-chair)
William Goetzmann
Jonathan Ingersoll

May 2006

Ph.D. in Financial Economics
MS in Statistics
MA in Financial Economics, December 2005
MA in Economics, Brown University, May 2000
BA in Economics, Wuhan University, China, June 1997 (Ranked No. 1 for four years among all finance students)

Yale School of Management, 2002–Present
Wang Shijie Excellency Fellowship, Wuhan University, 1993–1997
Best Student Award for being Ranked No. 9 in China's National College Entrance Exam out of millions of
     high school students, Wuhan Foreign Language School, 1993

Matthew Spiegel, Yale School of Management, 2003–present
William Goetzmann, Yale School of Management, summer 2005
Florencio Lopez, Yale School of Management, 2002–2003

1. Organizational Support for the Program Chair, 2005 EFA Meetings Moscow.
   Assisted in classification of papers, identification of reviewers and referees and planning of the final program.}
2. Referee
   Economic Journals: American Economic Review}
   Finance Journals: Journal of Financial and Quantitative Analysis, Journal of Empirical Finance
3. Invited Paper Presentation
   World Bank Research Panel World Bank, November 2005, Washington D.C.
   Liquidity Conference, Federal Reserve Bank of New York, Princeton University and MIT, New York, October 2005, New York.
   European Financial Association Annual Conference,EFA, August 2005, Moscow.
   Washington Area Financial Association Conference, WAFA, April 2005, Washington D.C.
   Quantitative Equity Research for Citadel Investment Group (Chicago, IL).
   Co-author presented at: University of Pennsylvania, University of North Carolina, Emory University, and University of Alabama.
   

Stock Return Dynamic under Earnings Management. (Job Market Paper)
Cross Sectional Variation of Stock Returns: Liquidity and Idiosyncratic Risk. (With Matthew Spiegel)
Market Liberalization and Return Volatility: Another View. (With Steve Jordan)

Platforms: Unix and Windows
Financial DataBases: Compustat, CRSP, TAQ Trades and Quotes database, I/B/E/S forecast and recommendations files.
Programming and Editing: Matlab, SAS, STATA, Eviews, C, C++, Perl, Fortran, Pascal, LaTeX, Emacs, Dreamweaver.

Matthew Spiegel (Chair)
135 Prospect Street
Yale School of Management
Box 208200
New Haven, CT. 06520-8200
Fax: (203) 432-8931
Email: Matthew.Spiegel@yale.edu

William Goetzmann
Edwin J. Beinecke Professor of Finance and
Management Studies
135 Prospect Street
Yale School of Management
Box 208200
New Haven, CT 06520-8200
Fax: (203) 432-8931
Email: William.Goetzmann@yale.edu

My research focuses on pricing anomalies and the inter-temporal dynamics of return volatility. My job market paper examines the impact of corporate managers’ smoothing of the reported earnings via real economic activities on stock return dynamics. The model developed in this paper offers a rational expectations earnings smoothing model that can explain the intertemporal dynamics of return and return volatility processes. The paper, "Cross Sectional Variation of Stock Returns: Liquidity and Idiosyncratic Risk," joint with Matthew Spiegel, analyzes the role of liquidity and idiosyncratic risk on the cross sectional variation of stock returns. The paper,joint with Steven Jordan, explores the role of opening the financial market to foreign investors on firm level return volatility.

Stock Return Dynamics under Earnings Management

This paper explores how earnings management influences asset returns and return volatility via real economic activity. In the model, firms smooth earnings via the costly and economically suboptimal intertemporal transfer of assets and liabilities. As a result, the firm's stock return follows a process that conforms to an EGARCH-like statistical model. The key idea is that real earnings management generates an unobservable cost, and the market has to infer the underlying wealth of the firm from the smoothed reported earnings series. This framework may help explain why asset returns underreact to good news and overreact to bad news, while no news is always good news to the market. Empirical evidence that earnings innovations impact future return volatility, in line with the model's predictions, is found in the data.

Cross Sectional Variation of Stock Returns: Liquidity and Idiosyncratic Risk

The roles played by idiosyncratic risk and liquidity in determining stock returns have recently received a great deal of attention. However, recent empirical tests have not examined the interaction between these two factors. As others have shown (and this paper confirms) stocks idiosyncratic risk and liquidity are negatively correlated. To what extent then is each variable responsible for the observed cross sectional patterns in stock returns? Overall, using monthly data, the paper finds that stock returns are increasing with the level of idiosyncratic risk and decreasing in a stock’s liquidity. However, while both liquidity and idiosyncratic risk play a role in determining returns, the impact of idiosyncratic risk is much stronger and often eliminates liquidity’s explanatory power. The point estimates indicate that a one standard deviation change in idiosyncratic risk has between 2.5 and 8 times the impact of a corresponding change in liquidity on cross sectional expected returns.

Market Liberalization and Return Volatility: Another View

This paper provides a set of empirical tests of the cross-sectional variation of stock volatility and investablility, where investability is defined as the degree to which a stock is accessible to foreigners. Unlike previous studies, which focus on market volatility and market return, we study the relationship between individual stock return volatility and its investability. Our findings have important implications for the role of foreign investors in emerging markets. Our results show that there is either a negative relationship between investability and return volatility for individual stocks, or that there is no significant relation between investability and return volatility. We further confirm it is not foreign funds flows that drive the volatility of emerging market returns, on the contrary, it is the stock volatility that drives the foreign funds flows.