We study the effects of institutionalization on fund manager compensation and asset prices. Institutionalization raises the performance-sensitive component of the equilibrium contract, which makes institutional investors effectively more risk averse. Institutionalization affects market outcomes through two opposing effects. The direct effect is to bring in more informed capital, and the indirect effect is to make each institutional investor trade less aggressively on information through affecting the equilibrium contract. When there are many institutions and little noise trading in the market, the indirect contracting effect dominates the direct informed capital effect in determining market variables such as the cost of capital, return volatility, price volatility, and market liquidity. Otherwise, the direct informed capital effect dominates.
Academic & Professional Qualification
- Ph.D., London School of Economics and Political Science
- M.A., Tsinghua University
- B.A., Tsinghua University
Dr. Shiyang HUANG received his Ph.D. degree in finance from the London School of Economics in 2015. He also holds a master degree and a bachelor degree in economics from Tsinghua University. He joined The University of Hong Kong in 2015.
Shiyang’s research agenda focuses on financial economics and empirical asset pricing. He has published research papers in several academic journals including Journal of Financial Economics, Management Science and Journal of Economic Theory. He also won the best paper awards at academic conferences, including Best Paper Award at 7th Melbourne Asset Pricing Meeting, Conference Best Paper Award at China International Conference in Finance of 2019, Best Paper Award at 14th Annual Conference in Financial Economics Research by Eagle Labs (IDC) of 2017, Yihong Xia Best Paper Award at hina International Conference in Finance of 2015, Conference Best Paper Award at Paris December Finance Meeting of 2014, IdR QUANTVALLEY / FdR Quantitative Management Initiative Research Award of 2013.
For a full and up-to-date profile, please visit http://www.fbe.hku.hk/~huangsy/
- Financial Economics
- Asset Pricing
- Information Economics
- “Public Market Players in the Private World: Implications for the Going-Public Process” (with Yifei Mao, Cong (Roman) Wang and Dexin Zhou), The Review of Financial Studies, forthcoming
- “Speed Acquisition” (with Bart Zhou Yueshen), Management Science, forthcoming
- “Innovation and Informed Trading: Evidence from Industry ETFs” (with Maureen O’Hara and Zhuo Zhong), The Review of Financial Studies, forthcoming
- “Offsetting Disagreement and Security Prices” (with Byoung-Hyoun Hwang, Dong Lou and Chengxi Yin), Management Science, 66(8), 2020, 3444-3465
- “Institutionalization, Delegation, and Asset Prices” (with Zhigang Qiu and Liyan Yang), Journal of Economic Theory, 186, 2020, 104977
- “Attention Allocation and Return Co-movement: Evidence from Repeated Natural Experiments” (with Yulin Huang and Tse-Chun Lin), Journal of Financial Economics, 132(2), 2019, 369-383
We hypothesize that when investors pay less attention to financial markets, they rationally allocate relatively more attention to market-level information than to firm-specific information, leading to increases in stock return co-movements. Using large jackpot lotteries as exogenous shocks that attract investors’ attention away from the stock market, we find supportive evidence that stock returns co-move more with the market on large jackpot days. This effect is stronger for stocks preferred by retail investors and is not driven by gambling sentiment. We also find that stock returns are less sensitive to earnings surprises and co-move more with industries on large jackpot days.