NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Hongjun Yan

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Working Papers

January 2013Informed Trading and Expected Returns
with James J. Choi, Li Jin: w18680
Does information asymmetry affect the cross-section of expected stock returns? We explore this question using representative portfolio holdings data from the Shanghai Stock Exchange. We show that institutional investors have a strong information advantage, and that past aggressiveness of institutional trading in a stock positively predicts institutions' future information advantage in this stock. Sorting stocks on this predictor and controlling for other correlates of expected returns, we find that the top quintile's average annualized return in the next month is 10.8% higher than the bottom quintile's, indicating that information asymmetry increases expected returns.
December 2010What Does Stock Ownership Breadth Measure?
with James J. Choi, Li Jin: w16591
Using holdings data on a representative sample of all Shanghai Stock Exchange investors, we show that increases in ownership breadth (the fraction of market participants who own a stock) predict low returns: highest change quintile stocks underperform lowest quintile stocks by 23% per year. Small retail investors drive this result. Retail ownership breadth increases appear to be correlated with overpricing. Among institutional investors, however, the opposite holds: Stocks in the top decile of wealth-weighted institutional breadth change outperform the bottom decile by 8% per year, consistent with prior work that interprets breadth as a measure of short-sales constraints.

Published: James J. Choi & Li Jin & Hongjun Yan, 2013. "What Does Stock Ownership Breadth Measure?," Review of Finance, European Finance Association, vol. 17(4), pages 1239-1278. citation courtesy of

December 2006Heterogeneous Expectations and Bond Markets
with Wei Xiong: w12781
This paper presents a dynamic equilibrium model of bond markets, in which two groups of agents hold heterogeneous expectations about future economic conditions. Our model shows that heterogeneous expectations can not only lead to speculative trading, but can also help resolve several challenges to standard representative-agent models of the yield curve. First, the relative wealth fluctuation between the two groups of agents caused by their speculative positions amplifies bond yield volatility, thus providing an explanation for the "excessive volatility puzzle" of bond yields. In addition, the fluctuation in the two groups' expectations and relative wealth also generates time-varying risk premia, which in turn can help explain the failure of the expectation hypothesis. These implications, ...

Published: Xiong, Wei and Hongjun Yan. “Heterogeneous Expectations and Bond Markets." Review of Financial Studies 23, 4 (2010): 1433-1466. citation courtesy of

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