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We observe a sharp increase in retail ownership and trading among high-priced stocks since the introduction of Fractional Trading (FT) in late 2019. The effects of FT were amplified by other factors like zero commission trading, stay-at-home orders, and distribution of stimulus checks. With FT, small market participants can exercise collective power on high-priced stocks if coordinated through attention-inducing events (such as being featured in a broker's Top Mover list or stock split announcements).
FIRS Conference, 2022; Financial Markets and Corporate Governance Conference, 2022;Conference on Emerging Technologies in Accounting and Financial Economics (CETAFE), 2022
3. “Everlasting Fraud” (with Nan Li, Wenyu Wang, and Gaoqing Zhang)
We model the interdependent mechanisms of corporate fraud and regulation. Our analyses yield two key insights. First, fraud is a never-ending game of cat and mouse. Second, although anti-fraud regulations can temporarily tamp down fraud, they do not eradicate fraud and may induce corporate fraud waves over time.
Accepted by the CICF meeting, 2022; 9th Conference on Financial Market Regulation (CFMR), 2022; MFA meeting, 2022; FARS Midyear Conference 2022; HKUST Accounting Symposium 2021; Columbia Burton Accounting Conference, 2021
2. “Corporate Advertising, Trading, and Volatility” (with Josh Madsen and Xinyuan Shao)  [Presentation]
Motivated by evidence that retail trading spikes on ad days,  that firms regularly place ads at weekly intervals, and that weekly ads frequently contain duplicate images, we introduce a measure of noise trading: an indicator of whether the firm placed an ad in the WSJ seven calendar days earlier. We use the measure to test the theoretical predictions of Collin-Dufresne and Fos (2016, Econometrica) and find broad support.
Accepted by GSU-RFS FinTech Conference, 2020; FARS Midyear Conference (Roundtable Session), 2020; CICF Conference, 2019; FIRS Conference, 2019; USC Conference on Emerging Technologies in Accounting and Financial Economics (CETAFE), 2019; BYU Accounting Symposium, 2018
1. “The Bright Side of Earnings Management” (with Renhui Fu)
Imagine a model that gets into a car accident and is left with an unsightly but temporary scar on her face. It is easy to see that wearing makeup may be a better choice in such a situation because invasive treatment often runs the risk of causing more scars or irreversible side effects. Along this line of thinking, this paper demonstrates the usefulness earnings management as a noise cancelling device. We show that stock underpricing, measured using mutual fund fire sales and the 2003 trading scandal, gives rises to firms' incentives to manipulate earnings but firms cutting R&D underperform those using accruals in the long-run.