Published/Accepted papers

Short Interest and Aggregate Stock Returns: International Evidence [SSRN]
Review of Asset Pricing Studies forthcoming

I find that short interest significantly and negatively predicts aggregate stock returns in 24 of 32 countries examined. This predictability survives out-of-sample tests, persists outside of recessions, and is not subsumed by other well-known return predictors. The results indicate that short interest contains valuable information for forecasting international market returns that is distinct and more powerful than that of other available predictors. However, the predictive power of short interest varies over time and across regions. It is higher around economic downturns when margin requirements tighten and in regions where short selling is constrained by regulations or equity lending market frictions.  

Non-Standard Errors  (#fincap) 
Journal of Finance forthcoming
with Albert Menkveld, Anna Dreber, Felix Holzmeister, Juergen Huber, Magnus Johannesson, Michael Kirchler, Sebastian Neusüss, Michael Razen, Utz Weitzel, and others (300+ co-authors)

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: Non-standard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for better reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.

Working papers

Short Seller Skills in the Global Context: Public News Processing and Access to Private Information 

Presented at: 2023 EasternFA, 2023 SWFA , 2022 CAFM,  2022 NZFM, Monash Brown Bag seminar

This paper examines global sources of short sellers’ information advantages in 37 countries. I show that trading on the news brings little additional profits to short sellers outside the United States. These results are not uniform across countries: shorting on the news is highly profitable in regions with a better quality of public information environment. I find evidence that short sellers anticipate future negative news returns and trade in the same direction as insiders, suggesting they possess valuable private information. Overall, my results indicate that short sellers’ information advantages in the global capital market come primarily from their access to private information rather than from their public news processing skills. 

Rationally Neglected Stocks
with Oleg Chuprinin and Chang-Mo Kang 

Presented at: 2021 CAFM, 2019 Paris December Finance Meeting, 2019 FIRN Annual Meeting, 2019 BFCM Conference (Amery Partners Best Paper Award), 2019 IFABS Angers Conference, 2019 SIRCA Young Researchers Workshop, UNSW Brown Bag Seminar

There are large cross-sectional differences in the probability and magnitude of mispricing among stocks. Mispricing is traditionally attributed to stock-specific frictions. We show that mispricing can be explained in a rational equilibrium where investors allocate investigative resources to stocks to maximize their expected profits from arbitrage. Stocks with smaller dollar profit potential are allocated less attention and their percentage mispricing is higher on average. For such stocks, information discovery by investors is slow and the mispricing is corrected mostly through mandatory disclosures by firms. Using measures of institutional attention and trading discreteness, we confirm this mechanism empirically. The attention allocation channel explains the cross-sectional pattern of mispricing better than any classic arbitrage frictions.  

Can Slow and Steady Win the Race? Examining Slow and Fast Liquidity Providers in Modern Equity Markets
with Sean Foley and Thomas Ruf

Presented at: 2019 AFBC, 2019 SBFC, 2019 UNSW Business School Research Fair (Best Poster Award)

We find that increased speed competition from high-frequency market makers (HFT MMs) reduces but does not entirely eliminate the participation of slower liquidity-providing MMs. The presence of HFT MMs reduces slower MMs’ profits without impacting the profitability of executed trades. These results indicate that HFT MMs do not expose slower MMs to increased adverse selection. However, these findings only hold when the bid-ask spread is constrained by the minimum tick size. Tick-constrained spreads help slower MMs to retain profitability in their market-making business and remain as liquidity providers.