NBER Working Papers by Ning Zhu

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Working Papers

May 2010Did Bankruptcy Reform Cause Mortgage Default to Rise?
with Wenli Li, Michelle J. White: w15968
This paper argues that the U.S. bankruptcy reform of 2005 played an important role in the mortgage crisis and the current recession. When debtors file for bankruptcy, credit card debt and other types of debt are discharged--thus loosening debtors' budget constraints. Homeowners in financial distress can therefore use bankruptcy to avoid losing their homes, since filing allows them to shift funds from paying other debts to paying their mortgages. But a major reform of U.S. bankruptcy law in 2005 raised the cost of filing and reduced the amount of debt that is discharged. We argue that an unintended consequence of the reform was to cause mortgage default rates to rise. We estimate a hazard model to test whether the 2005 bankruptcy reform caused mortgage defaults to rise, using a la...

Published: "Did Bankruptcy Reform Cause Mortgage Defaults to Rise?" with Wenli Li and Ning Zhu. NBER working paper 15968. Published in American Economic Journal: Economic Policy, 2011. citation courtesy of

July 2008Saving Your Home in Chapter 13 Bankruptcy
with Michelle J. White: w14179
This paper examines how filing for bankruptcy under Chapter 13 helps financially distressed debtors save their homes. We develop a model of debtors' decisions to default on their mortgages and file for bankruptcy under Chapter 13 and evaluate the model using new data on Chapter 13 bankruptcy filers. We also examine the effect of allowing bankruptcy judges to reduce debtors' mortgage payments, i.e., introducing "cram-down" of mortgages in Chapter 13.

We find that 96% of Chapter 13 filers are homeowners and 79% of filers repay mortgage debt in their repayment plans; while just 9% of filers repay only unsecured debt in their plans. These results suggest that filers use Chapter 13 almost exclusively as a "save-your-home" procedure. But under current law, only about 1% Chapter 13...

Published: "Saving Your Home in Chapter 13 Bankruptcy," with Ning Zhu. NBER working paper 14179. Journal of Legal Studies, vol. 39:1, pp. 33-61, January 2010 citation courtesy of

February 2003Rain or Shine: Where is the Weather Effect?
with William N. Goetzmann: w9465
Saunders (1993) and Hirshleifer and Shumway (2001) document the effect of weather on stock returns. The proposed explanation in both papers is that investor mood affects cognitive processes and trading decisions. In this paper, we use a database of individual investor accounts to examine the weather effects on traders. Our analysis of the trading activity in five major U.S. cities over a six-year period finds vistually no difference in individuals propensity to buy or sell equities on cloudy days as opposed to sunny days. If the association between cloud cover and stock returns documented for New York and other world cities is indeed caused by investor mood swings, our findings suggest that researchers should focus on the attitudes of market-makers, news providers or other agents physicall...

Published: Goetzmann, William N. and Ning Zhu. "Rain or Shine: Where is the Weather Effect?" European Financial Management 11, 5 (November 2005): 559-578. citation courtesy of

Efficiency and the Bear: Short Sales and Markets around the World
with William N. Goetzmann, Arturo Bris: w9466
We analyze cross-sectional and time series information from forty-seven equity markets around the world, to consider whether short-sales restrictions affect the efficiency of the market, and the distributional characteristics of returns to individual stocks and market indices. Using the approach developed in Morck (2000) we find significantly more cross-sectional variation in equity returns in markets where short selling is feasible and practiced, controlling for a host of other factors. This evidence is consistent with more efficient price discovery at the individual security level. A common conjecture by regulators is that short-selling restrictions can reduce the relative severity of a market panic. We test this conjecture by examining the skewness of market returns. We find that...

Published: Goetzmann, William and Arturo Bris. "Efficiency and the Bear: Short Sales and Markets around the World." The Journal of Finance 62, 3 (June 2007): 1029-1079 citation courtesy of

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