Research
Working Papers
The Dodd-Frank Act and Hedge Fund Operational Risk (this version - January 2026)
Semifinalist for the 2024 FMA Best Paper Award
With William N. Goetzmann and Bing Liang
Abstract: We examine the impact of the post-Dodd-Frank change in 2011 on hedge fund disclosure. We find that new questions added to SEC’s Form ADV, post-Dodd-Frank, enhance forecasting of adverse operational events compared to pre-Dodd-Frank disclosures. Using machine learning, our analysis yields a uni-dimensional operational risk score from the public SEC data, effective in predicting liquidation events, leverage changes, and performance metrics. The score also predicts net fund flows, indicating the relevance of disclosed operational risk information to investor decisions. Over five years of the post-Dodd-Frank Act, fund flow response significantly increased following the amended Form ADV implementation.
Media Coverage: Faculti; see the video now
The Value of Strategic Information Release in Fintech Lending (this version - September 2025)
With Wenyao Hu
Abstract: We show that the financial technology platform, Prosper, displays 40% of all loans in the first minute and charges higher fees than loans in other minutes, after controlling for loan characteristics and numerous fixed effects. Our three identification tests reveal that Prosper intentionally lists loans with higher fees first to maximize revenues. Moreover, the results are more significant for loans with a higher funding probability, such as those with small amounts, short terms, and high credit scores. We finally observe that borrowers with first-minute loans are less likely to request another loan on the site after the deliberate loan listing.
Hedge Funds and ESG Sentiment (this version - February 2026)
Coauthored with Bing Liang
Abstract: This paper investigates whether hedge funds can capitalize on fluctuations in ESG sentiment. Using a novel dataset that captures worldwide public perceptions of ESG discussions, I construct composite and pillar-level ESG sentiment indices. I find that hedge funds actively time ESG sentiment by anticipating future sentiment shifts and exploiting short-term lags between sentiment changes and subsequent stock price adjustments to generate higher alpha and reduce downside risk. Funds’ timing skills vary across strategies, with directional and semi-directional funds exhibiting stronger average timing abilities. These results highlight that hedge funds can harness public, values-based perceptions of ESG practices to enhance performance and manage risk.
Publication
Assessing U.S. Insurance Firms' Climate Change Impact and Response
Coauthored with Prof. Aparna Gupta and Prof. Abena Owusu (published on April 12, 2023)
Supported by 2019 Global Association of Risk Professionals (GARP) Research Fellowship
The Geneva Papers on Risk and Insurance-Issues and Practice, 49(3), 571-604, (2024)
Abstract: Climate change poses a serious risk for insurance firms, threatening their sustainability from numerous channels of impact. Assessing this impact, however, is not straightforward. We assess and distinguish between insurance firms by impact and response to climate change and relate the firms’ financial characteristics to climate risk exposure. A text mining approach using climate change sub-dictionaries on risk exposure, impact, and response, and a nested feature extraction method is developed to define and classify insurance firms’ adaptation levels to climate change. These features reveal that casualty insurance firms are most susceptible to acute climate risk, while life insurance firms are more prone to chronic climate risk. Insurance firms with the highest exposure to climate change present a high level of adaptation to pecuniary impact of the risk. Nevertheless, many firms with exposure remain inadequately prepared for climate change and firms with high exposure show relatively higher financial weakness.
Work in Progress
Attitudes in Finance (with William Goetzmann and Francesco Fabozzi)
Inside Hedge Funds: Evidence from Mandatory and Voluntary Disclosures (with Bing Liang)
Identifying Skilled Mutual Fund Managers through Mandatory Disclosures (with Asli Eksi)
Local Income Uncertainty and Peer-to-Peer Lending (with Chen Li)
The Dodd-Frank Act and Hedge Fund Operational Risk (Faculti)
Media Coverage: Faculti (https://faculti.net/the-dodd-frank-act-and-hedge-fund-operational-risk/)
Assessing U.S. Insurance Firms' Climate Change Impact and Response
The figure above presents the structure of our climate change sub-dictionaries and their attributes. The overall climate change dictionary consists of three sub-dictionaries with additional categories under each sub-dictionary.
This figure presents our regression tree analysis of climate change risk exposure. Sub-figure (a) shows the decision tree for predicting acute risk. Sub-figure (b) shows the decision tree for predicting chronic risk and sub figure (c) for predicting the total risk, defined as the sum of acute and chronic risk words. Model training is done on 85% of the data and testing is done on the remaining 15%.All trees are pruned to reduce the root mean squared error.