I am a Ph.D. Candidate in Financial Economics at MIT Sloan School of Management.
I am on the 2021/2022 academic job market.
Technological Innovation in Finance
Corporate Finance Theory
Information Economics and Information Design
Address: 100 Main Street, Building E62-680, Cambridge, MA 02142
I study the optimal algorithmic disclosure in a lending market where lenders use a predictive algorithm to mitigate adverse selection. The predictive algorithm is unobservable to borrowers and uses a manipulable borrower feature as input. A regulator maximizes market efficiency by disclosing information about the statistical properties of variables embedded in the predictive algorithm to borrowers. Under the optimal disclosure policy, the posterior belief consists of two disjoint regions in which the borrower feature is more relevant and less relevant in predicting borrower quality, respectively. The optimal disclosure policy differentiates posterior lending market equilibria by the equilibrium data manipulation levels. Equilibria with more data manipulation hurt market efficiency, but also discourage lenders’ use of the borrower feature. Equilibria with less data manipulation benefit from that and generate more efficient market outcomes. Unconditionally, the borrower feature is used less intensively under optimal disclosure. This information design problem can be reduced to a one-dimensional maximization problem by imposing a mild distributional assumption on manipulation cost. As an extension, I also discuss the joint design of algorithmic disclosure and costly verification.
We study a dynamic stopping game between a principal and an agent. The agent is privately informed about his type. The principal learns about the agent's type from a noisy performance measure, which can be manipulated by the agent via a costly and hidden action. We fully characterize the unique Markov equilibrium of this game. We find that terminations/market crashes are often preceded by a spike in (expected) performance. Our model also predicts that, due to endogenous signal manipulation, too much transparency can inhibit learning. As the players get arbitrarily patient, the principal elicits no useful information from the observed signal.
Post-crisis bank regulations raised market-making costs for bank-affiliated dealers. We show that this can, somewhat surprisingly, improve overall investor welfare and reduce average transaction costs despite the increased cost of immediacy. Bank dealers in OTC markets optimize between two parallel trading mechanisms: market making and matchmaking. Bank regulations that increase market-making costs change the market structure by intensifying competitive pressure from non-bank dealers and incentivizing bank dealers to shift their business toward matchmaking. Thus, post-crisis bank regulations have the (unintended) benefit of replacing costly bank balance sheets with a more efficient form of financial intermediation.
with Dan Luo
We study SPACs in a continuous-time delegated investment model. Our model is built upon three unique features of SPACs: the sponsor and the investor are only partially aligned, a SPAC has a short time horizon, and the investor has the final control over investment approval. Due to the misalignment in incentives, the sponsor has an increasing incentive to propose unprofitable projects to the investor; in response, the investor exerts more stringent screening based on her information. Although the screening helps curb the sponsor’s moral hazard, it also dampens the disciplining effect of partial alignment in incentives. When the investor’s information is sufficiently noisy, the second effect dominates, so giving the investor the control over investment approval reduces everyone’s welfare. This adverse effect is more pronounced if entrepreneurs’ strategic choices of SPAC or the sponsor’s strategic choice of effort are considered. We find that introducing public assessment and making the investor’s control right contingent on it may benefit both parties. We also explore whether a SPAC should be allowed to continue after the current project is disapproved by the investor.
with Dong Wei
We study a continuous-time model of long-run employment relationship with ﬁxed wage and at-will ﬁring; that is, termination of the relationship is non-contractible. Depending on his type, the worker either always works hard, or can freely choose his effort level. The ﬁrm does not know the worker’s type and the monitoring is imperfect. We show that, in the unique Markov equilibrium, as the worker’s reputation worsens, his job becomes less secure and the strategic worker works harder. We further demonstrate that the relationship between average productivity and job insecurity is U-shaped, which is consistent with typical ﬁndings in the organizational psychology literature.