Ye Li, 2012-17 Columbia PhD, joined OSU in 2017
Ye Li, 2012-17 Columbia PhD, joined OSU in 2017
R&R at the American Economic Review
Abstract: Intangible capital creates endogenous financial risk by inducing self-perpetuating savings gluts. Firms save for investments in intangibles that are unpledgeable but essential for the creation of new assets. Intermediaries profit from channeling firms’ savings into asset price bubbles. The bubbly value in turn stimulates firms’ asset creation and savings for intangibles. Fragility builds up as banks’ debt accumulates and funding cost declines. The model offers a coherent account of intangible investment, corporate savings, intermediary leverage, interest rate, and collateral asset price in the decades leading up to the Great Recession. It generates booms with rising downside risks and stagnant recessions.
Selected presentations: CEPR ESSFM Gerzensee, Cornell Johnson, CUHK,European Finance Association (EFA), European Winter Finance Summit (Best Paper Award), HKUST Annual Macro Workshop,
SUFE, Temple Fox, U Calgary (Haskayne), Western Finance Association (WFA)
with Lin (Will) Cong, Neng Wang, R&R at the Review of Financial Studies
Abstract: We develop a dynamic asset-pricing model of cryptocurrencies/tokens that facilitate peer-to-peer transactions on digital platforms. The equilibrium value of tokens is determined by users' transactional demand rather than cashflows as in standard valuation models. Endogenous platform adoption exhibits an S-curve -- it starts slow, becomes volatile, and eventually tapers off. Users' adoption generates positive network externality, which leads to endogenous token-price risk and boom-bust price dynamics. Tokens allow users to capitalize on platform growth, inducing an intertemporal feedback between user adoption and token price that accelerates platform adoption, reduces user-base volatility, and improves welfare.
Selected presentations: CKGSB, RCFS/RAPS Conference at Baha Mar, Stanford SITE, UT Dallas Fall Finance Conference, U Zurich/ETH; by coauthors: Ant Financial (Alibaba Group), ASSA/AFE 2019, Atlanta Fed, CEPR ESSFM Gerzensee, Chicago Booth, Finance UC Chile, Georgetown McDonough, Finance Theory Group, SEC, Tsinghua, U Washington Foster; awards: AAM-CAMRI-CFA Institute Prize in Asset Management, CME Best Paper Award (Emerging Trends in Entrepreneurial Finance)
Edward Denbee, Christian Julliard, Kathy Yuan, R&R at the Journal of Financial Economics
Abstract: We estimate the liquidity multiplier and individual banks’ contribution to systemic risk in an interbank network using a structural model. Banks borrow liquidity from neighbors and update their valuation based on neighbors' actions. When the former (latter) motive dominates, the equilibrium exhibits strategic substitution (complementarity) of liquidity holdings, and a reduced (increased) liquidity multiplier dampening (amplifying) shocks. Empirically, we find substantial and procyclical network-generated risks driven mostly by changes of equilibrium type rather than network topology. We identify the banks that generate most systemic risk and solve the planner's problem, providing guidance to macro-prudential policies.
Selected oresentations: Short-Term Funding Markets, Bank of Canada/Payments Canada, Macro Finance Society (Boston College), NBER Summer Institute, OSU Fisher; by coauthors: Bank of England, Fed/OFR Financial Stability Conference, LSE, SSE, WFA; grant: Foundation Banque de France Research Grant
Selected presentations: HKUST Finance Symposium, Paris December Meeting (Best Paper Award); by coauthors: RCFS/RAPS Conference at Baha Mar, UT Dallas Fall Finance Conference, Econometric Society (North America), Northern Finance Association (NFA), Orebro Workshop on Predicting Asset Returns
with Chen Wang
Abstract: Delegation bears an intrinsic form of uncertainty. Investors hire managers for their superior models of asset markets, but delegation outcome is uncertain precisely because managers' model is unknown to investors. We model investors' delegation decision as a trade-off between asset return uncertainty and delegation uncertainty. Our theory explains several puzzles on fund performances. It also delivers asset pricing implications supported by our empirical analysis: (1) because investors partially delegate and hedge against delegation uncertainty, CAPM alpha arises; (2) the cross-section dispersion of alpha increases in uncertainty; (3) managers bet on alpha, engaging in factor timing, but factors' alpha is immune to the rise of their arbitrage capital - when investors delegate more, delegation hedging becomes stronger. Finally, we offer a novel approach to extract model uncertainty from asset returns, delegation, and survey expectations.
Selected presentations: ASU Sonoran Winter Conference, CEPR ESSFM Gerzensee, CUHK, European Winter Finance Summit, INSEAD, Stanford SITE, U Zurich