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Pengjie Gao


"Municipal Borrowing Costs and State Policies for Distress Municipalities," 2017, with Chang Lee and Dermot Murphy, The Journal of Financial Economics, Forthcoming (First Draft: May, 2016)

"Do Hedge Funds Exploit Rare Disaster Concerns?," 2017, with George Gao and Zhaogang Song, The Review of Financial Studies, Conditionally Accepted. (First Draft: June, 2013)

Data: Rare Disaster Index (RIX): time-series data download (last updated: Decemeber 31, 2013)

"The Global Relationship between Default Risk and Equity Returns," 2017, with Chris Parsons and Jianfeng Shen, The Review of Financial Studies, Forthcoming. (First Draft: June, 2012)

"Liquidity in a Market for Unique Assets: Specified Pool and TBA Trading in the Mortgage Backed Securities Market," 2016, with Paul Schultz and Zhaogang Song, The Journal of Finance, Forthcoming. (First Draft: December, 2014)

"The Sum of All FEARS: Investor Sentiment and Asset Prices," 2015, with Zhi Da and Joey Engelberg, The Review of Financial Studies (First Draft: 2009)

Data: FEARS Daily Index Data

"The Value of a Rolodex: CEO Pay and Personal Network," 2013, with Joey Engelberg and Chris Parsons, The Review of Financial Studies. (First Draft: 2009)

"Friends with Money," 2012, with Joey Engelberg and Chris Parsons, The Journal of Financial Economics. (First Draft: 2010)

"In Search of Attention," 2011, with Zhi Da and Joey Engelberg, The Journal of Finance. (First Draft: 2009)

"Impatient Trading, Liquidity Provision and Mutual Funds Stock Selection," 2011, with Zhi Da and Ravi Jagannathan, The Review of Financial Studies. (Internet Appendix) (First Draft: 2007)

"Clientele Change, Liquidity shock, and the Return on Financially Distressed Stocks," 2010, with Zhi Da, The Journal of Financial and Quantitative Analysis. (First Draft: 2004)

"Short Sales and the Weekend Effect - Evidence from a Natural Experiment," 2015, with Jia Hao, Ivalina Kalcheva, and Tongshu Ma, The Journal of Financial Markets, (First Draft: 2005)

Working Papers

"What's in a (school) name? Racial discrimination in higher education bond markets," 2015, with Casey Dougal, Bill Mayew, and Chris Parsons. (This Draft: September, 2016)

Abstract: Historically black colleges and universities (HBCUs) pay more in underwriting fees to issue tax-exempt bonds, compared to similar, non-HBCU schools. This appears to reflect higher deadweight costs of findings willing buyers: the effect is three times larger in the Deep South, where racial animus has historically been the highest. School attributes or credit quality explain almost none of the effects. For example, identical differences are observed between HBCU and non-HBCU bonds: 1) having AAA credit ratings, and 2) insured by the same company, even prior to the Financial Crisis of 2008. HBCU-issued bonds are also more expensive to trade in the secondary market, and when they do, sit in dealer inventory longer.

"Liquidity Backstop, Corporate Borrowings, and Real Effect," 2012, with Hayong Yun. (This Draft: August, 2013)

Abstract: This research investigates the real effects of public liquidity provision. Using the Commercial Paper Funding Facility’s (CPFF) eligibility criteria for non-financial commercial paper issuers as the identification strategy, we show that firms with access to the CPFF were able to mitigate the financing disruptions caused by the Lehman Brothers bankruptcy and the ensuing dysfunctional credit market. CPFF directly reduces risk of eligible firms, which in turn improved their financing and short-term profitability. We find liquidity spillover effects from CPFF-eligible firms to their customers through the increased use of trade credit, which propagates the real effects throughout the economy.

"Political Uncertainty and Public Financing Costs," 2013, with Yaxuan Qi. (This Draft: August, 2013)

Abstract: This research investigates how political uncertainty around U.S. gubernatorial elections influences the borrowing costs of public debt, measured by yields of municipal bonds. We find that yields of municipal bonds increase sharply by 6 to 8 basis points before elections and then reverse afterward. Elections have more pronounced impact during economic downturns, when outcomes are less predictable, and when states have more outstanding debt. Several state institutions, such as GAAP-budgeting, spending limits and tax-increase limits, help to mitigate the adverse impact of political uncertainty. Evidence from detailed municipal bonds transactions suggests that declining demand due to investor aversion to political uncertainty is the driving force behind the increases in yields prior to elections. The findings suggest that investors are averse to political uncertainty and demand compensation for bearing this risk.

"The Pre-Earnings Announcement Drift," 2010, with Peter D. Easton and George Gao. (First Draft: 2008)

Abstract: We present evidence of a predictable drift in stock prices before the earnings announcements of firms that announce their earnings later than other firms in their industry. We form portfolios based on the returns of later announcers that are implied by the abnormal returns of earlier announcers and the historical pair-wise covariance of the abnormal earnings announcement date returns of earlier and later announcers. A long-short trading strategy based on these implied returns generates monthly returns of more than 100 basis points. The drift is neither due to the well-known momentum effect nor a manifestation of post-earnings announcement drift; it is evident both between the earlier announcers’ earnings announcement dates and the later announcers’ earnings announcement dates and at the later announcers’ earnings announcement dates. The continued under-reaction after later announcers’ earnings announcements is shown to be an under-reaction to the later announcers’ own earnings announcements (i.e., post-earnings announcement drift) rather than a continued under-reaction to the earnings news of earlier announcers (i.e., pre-earnings announcement drift). We show that transaction costs explain the predictability of later announcers’ returns.