Grace Xing Hu
University of Hong Kong
Institutional Affiliation: University of Hong Kong
NBER Working Papers and Publications
|May 2019||Premium for Heightened Uncertainty: Explaining Pre-Announcement Market Returns|
with Jun Pan, Jiang Wang, Haoxiang Zhu: w25817
We show that the pattern of positive pre-announcement market drift is present not only for FOMC announcements, as documented by Lucca and Moench (2015), but also for other major macroeconomic announcements such as Nonfarm Payroll, ISM and GDP. This commonality in pre-announcement returns leads us to hypothesize that there are two kinds of risks associated with pre-scheduled macroeconomic announcements. The first risk arises from the uncertain content of the news itself and is directional in nature, while the second risk is associated with the “heightened uncertainty” in anticipation of a pre-scheduled announcement, relating in particular to its potential market impact. Theoretically, we show that it is the resolution of this second risk prior to an announcement that leads to the positive p...
|February 2018||Chinese Capital Market: An Empirical Overview|
with Jun Pan, Jiang Wang: w24346
The Chinese capital market, despite its relative short history in its modern form, has experienced a tremendous growth and is now the second largest in the world. Due to China's tight capital controls, the development of its capital market has mostly been isolated from and hence not been well understood by the rest of the world. Yet, this state of isolation is bound to change substantially as China becomes more integrated into the global financial system. In this paper, we provide an empirical overview of the Chinese capital market: its historical development and main empirical characteristics.
|August 2015||Tri-Party Repo Pricing|
with Jun Pan, Jiang Wang: w21502
In this paper, we examine the pricing determinants in the systemically important tri-party repo market. Taking advantage of the recently available N-MFP reports filed by money market funds, we construct a novel dataset that contains tri-party repo transactions between money market funds and dealer banks. We find a large cross-sectional heterogeneity in repo pricing, reflected most significantly in the haircuts of repos backed by equity and corporate bonds. Surprisingly, it is the fund families, not bank dealers, who are the dominant factor in determining the pricing. Moreover, the repo market exhibits significant segmentation, with fund families adopting three different pricing schemes: counter-party sensitive, counter-party and collateral sensitive, and uniform. Most fund families use ...