Fan Yang

The University of Hong Kong
Suite 908
K. K. Leung Building
Pokfulam Road, Hong Kong

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NBER Working Papers and Publications

June 2014External Equity Financing Shocks, Financial Flows, and Asset Prices
with Frederico Belo, Xiaoji Lin: w20210
The ability of corporations to raise external equity finance varies with macroeconomic conditions, suggesting that the cost of equity issuance is time-varying. Using cross sectional data on U.S. publicly traded firms, we construct an empirical proxy of an aggregate shock to the cost of equity issuance, which we interpret as a financial shock. We show that this shock captures systematic risk, and that exposure to this shock helps price the cross section of stock returns including book-to-market, investment, and size portfolios. We propose a dynamic investment-based model with stochastic equity issuance costs and a collateral constraint to interpret the empirical findings. Our central finding is that time variation in external equity financing costs is important for the model to quantitative...
February 2010On the Relative Pricing of long Maturity S&P 500 Index Options and CDX Tranches
with Pierre Collin-Dufresne, Robert S. Goldstein: w15734
We investigate a structural model of market and firm-level dynamics in order to jointly price long-dated S&P 500 options and tranche spreads on the five-year CDX index. We demonstrate the importance of calibrating the model to match the entire term structure of CDX index spreads because it contains pertinent information regarding the timing of expected defaults and the specification of idiosyncratic dynamics. Our model matches the time series of tranche spreads well, both before and during the financial crisis, thus offering a resolution to the puzzle reported by Coval, Jurek and Stafford (2009).

Published: On the Relative Pricing of long Maturity Options an d Collateralized Debt Obligations," Pierre Collin- Dufresne, Robert S. Goldstein and Fan Yang, The Journal of Finance, Vol.67 No.6, 2012.

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