Jianan Liu

Contact Information

Primary Email:
jiananl@wharton.upenn.edu
Mobile Phone:
6146203256

office Address:
2316 Steinberg-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6367

Links: CV

Overview

I am a Ph.D. Candidate in Finance at the Wharton School of the University of Pennsylvania. I am on the job market this year and will be available for interviews at the 2019 ASSA annual meeting in Atlanta.

Research Interests

Empirical Asset Pricing, Investments, Institutional Investors, China’s Financial Markets

References

David Musto, Nikolai Roussanov, Robert F. Stambaugh (chair), Yu Yuan

Education

Ph.D. in Finance, The Wharton School, University of Pennsylvania (Expected: 2019)

M.S. in Statistics, The Ohio State University (2014)

B.S. in Statistics, Shanghai University of Finance and Economics (2012)

Research

JOB MARKET PAPER

Comovement in Arbitrage Limits

Estimates of mispricing, such as deviations from no-arbitrage relations, strongly comove across five financial markets. One common component—the arbitrage gap—explains the majority of variability in mispricing estimates for futures, Treasury securities, foreign exchange, and options. Prominent equity anomalies also comove significantly with the arbitrage gap. Variables affecting arbitrage capital availability, such as the TED spread and hedge fund flows and returns, explain two-thirds of the arbitrage gap’s variation. During periods of tighter capital constraints, the comovement in mispricings becomes stronger. The findings support theoretical predictions that common sources of funding shocks can cause comovement in mispricings across markets.

OTHER PAPERS

Absolving Beta of Volatility’s Effects (with Robert F. Stambaugh and Yu Yuan)

Journal of Financial Economics, Volume 128, April 2018, p. 1-15

Abstract: The beta anomaly — negative (positive) alpha on stocks with high (low) beta — arises from beta’s positive correlation with idiosyncratic volatility (IVOL). The relation between IVOL and alpha is positive among underpriced stocks but negative and stronger among overpriced stocks (Stambaugh, Yu, and Yuan, 2015). That stronger negative relation combines with the positive IVOL-beta correlation to produce the beta anomaly. The anomaly is significant only within overpriced stocks and only in periods when the beta-IVOL correlation and the likelihood of overpricing are simultaneously high. Either controlling for IVOL or simply excluding overpriced stocks with high IVOL renders the beta anomaly insignificant.

Size and Value in China (with Robert F. Stambaugh and Yu Yuan)

Journal of Financial Economics, Forthcoming

Abstract: We construct size and value factors in China. The size factor excludes the smallest 30% of firms, which are companies valued significantly as potential shells in reverse mergers that circumvent tight IPO constraints. The value factor is based on the earnings-price ratio, which subsumes the book-to-market ratio in capturing all Chinese value effects. Our three-factor model strongly dominates a model formed by just replicating the Fama and French (1993) procedure in China. Unlike that model, which leaves a 17% annual alpha on the earnings-price factor, our model explains most reported Chinese anomalies, including profitability and volatility anomalies.

Jianan Liu, Tobias J. Moskowitz, Robert F. Stambaugh (Working), Pricing Without Mispricing. Abstract
We offer a novel test of whether an asset pricing model describes expected returns in the absence of mispricing. Our test assumes such a model assigns zero alpha to investment strategies using decade-old information. The CAPM satisfies this condition, but prominent multifactor models do not. While multifactor betas help capture current expected returns on mispriced stocks, persistence in those betas distorts the stocks’ implied expected returns after prices correct. These results are most evident in large-cap stocks, whose multifactor betas are the most persistent. Hence, prominent multifactor models distort expected returns, absent mispricing, for even the largest, most liquid stocks.
Jianan Liu, Robert F. Stambaugh, Yu Yuan (2019), Size and Value in China, Journal of Financial Economics, 134 (), pp. 48-69. Abstract
We construct size and value factors in China. The size factor excludes the smallest 30% of firms, which are companies valued significantly as potential shells in reverse mergers that circumvent tight IPO constraints. The value factor is based on the earnings-price ratio, which subsumes the book-to-market ratio in capturing all Chinese value effects. Our three-factor model strongly dominates a model formed by just replicating the Fama and French (1993) procedure in China. Unlike that model, which leaves a 17% annual alpha on the earnings-price factor, our model explains most reported Chinese anomalies, including profitability and volatility anomalies.

Related
Files
Online Appendix
Jianan Liu, Robert F. Stambaugh, Yu Yuan (2018), Absolving Beta of Volatility’s Effects, Journal of Financial Economics, 128 (), pp. 1-15.