Selected Publications
l Do Local Newspapers Matter to Institutional Investors? (with Jonathan Sangwook Nam), 2025, Contemporary
Accounting Research, Forthcoming.
o This
study examines the informational role of local newspapers in institutional
investments. Exploring local newspaper closures across US counties, we document
that institutional investors significantly reduce their holdings in firms
located near the closed newspapers. The post-closure decrease in institutional
holdings is concentrated for non-local or non-hedge fund institutions. In
contrast, institutions that are likely to possess information advantages—local
institutions or hedge funds—do not decrease their holdings and may even
increase them when faced with a lack of local news coverage. Further analysis
reveals that local newspaper closures adversely impact institutional investors’
ability to predict firms’ stock returns, particularly for non-local or non-hedge
fund institutions. Collectively, we provide novel evidence suggesting that
local newspapers are a key channel through which institutional investors acquire
geographically scattered information.
l
_..Do Prime Brokers Matter in the Search for Informed
Hedge Fund Managers? (with George O.
Aragon and Ji-Woong Chung), 2023, Management Science 69, 4932-4952.
o Using the
setting of funds of hedge funds (FoFs), we show that prime brokers (PBs)
facilitate investors' search for informed hedge fund managers. We find that
FoFs exhibit PB bias, a disproportionate preference for hedge funds serviced by
their connected PBs. This PB bias is stronger when the cost of hedge fund due
diligence is higher relative to capital and when the FoF's management firm
generates higher prime brokerage fees. PB bias also predicts FoF performance:
the highest PB-bias quartile outperforms the rest by 2.08%–2.45% per annum,
after adjusting for differences in their risks.
l
_..Timescale
Betas and the Cross Section of Equity Returns: Framework, Application, and
Implications for Interpreting the Fama-French Factors (with Francis In and Tong Suk Kim), 2017, Journal
of Empirical Finance 42, 15-39.
o We show
that standard beta pricing models quantify an asset's systematic risk as a
weighted combination of a number of different timescale betas. Given this, we
develop a wavelet-based framework that examines the cross-sectional pricing
implications of isolating these timescale betas. An empirical application to
the Fama-French model reveals that the model's well-known empirical success is
largely due to the beta components associated with a timescale just short of a
business cycle (i.e., wavelet scale 3). This implies that any viable
explanation for the success of the Fama-French model that has been applied to
the Fama-French factors should apply particularly to the scale 3 components of
the factors. We find that a risk-based explanation conforms closely to this
implication.
l
Prime Broker-Level Comovement in Hedge Fund Returns:
Information or Contagion? (with Ji-Woong
Chung), 2016, Review of Financial Studies 29, 3321-3353.
o .We document strong comovement in the returns of hedge
funds sharing the same prime broker. This comovement is driven neither by funds
in the same family nor in the same style, and it is distinct from market-wide
and local comovement. The common information hypothesis attributes this
phenomenon to the prime broker providing valuable information to its hedge fund
clients. The prime broker-level contagion hypothesis attributes the comovement
to the prime broker spreading funding liquidity shocks across its hedge fund
clients. We find strong evidence supporting the common information hypothesis,
but limited evidence in favor of the prime broker-level contagion hypothesis.
l
_..A
Longer Look at the Asymmetric Dependence between Hedge Funds and the Equity
Markets (with Francis In, Gunky Kim,
and Tong Suk Kim), 2010, Journal of Financial and Quantitative
Analysis 45,
763-789.
o .This paper reexamines, at a range of investment
horizons, the asymmetric dependence between hedge fund returns and market
returns. Given the current availability of hedge fund data, the joint
distribution of longer-horizon returns is extracted from the dynamics of
monthly returns using the filtered historical simulation; we then apply the
method based on copula theory to uncover the dependence structure therein.
While the direction of asymmetry remains unchanged, the magnitude of asymmetry
is attenuated considerably as the investment horizon increases. Similar horizon
effects also occur on the tail dependence. Our findings suggest that
nonlinearity in hedge fund exposure to market risk is more short term in
nature, and that hedge funds provide higher benefits of diversification, the
longer the horizon.
Selected Working Papers
l
_..Competing for Flows through Common Distributors (with Yu Sung Ha), 2025
o .A phenomenon commonly referred to as mutual fund
tournaments is driven by mutual funds competing for flows through common
distributors. We find that funds adjust risk in the second half of the year
based on their midyear rankings within a distributor's menu, rather than within
their style categories or fund families. The extent of this risk adjustment can
be exacerbated or mitigated by distributor-level policies, such as promoting
top-performing funds or deleting underperforming funds from the menu. Further
analysis shows that risk adjustment is not the only game in town: funds also
adjust the fees paid to distributors in response to poor year-to-date rankings,
revealing a distinct, non-risk dimension of mutual fund tournaments shaped by
intermediated distribution.
l
_..Does Portfolio Disclosure Make Money Smarter? (with Andrew J. Sinclair and Stig J. Xeno), 2021
o .We provide causal evidence that mandatory portfolio
disclosure helps investors evaluate and select hedge fund managers. Using a
staggered difference-in-differences analysis, we demonstrate that investor
capital flows better predict fund performance among funds that publicly
disclose their portfolio holdings. Additional cross-sectional analyses suggest
that this gain in selection ability varies with the informational value of
disclosure. Furthermore, examining investor-level allocations, we find that institutional
investors earn higher returns on their allocations to disclosing funds.
Overall, these results help contribute to the cost-benefit analysis of
mandatory portfolio disclosure.
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