Harrison Hong

 

 

John Scully 1966 Professor of Economics and Finance
Department of Economics
Princeton University
Princeton, NJ 08540-5296

           Phone: (609) 258-0259
           Fax: (609) 258-0771
           Email: hhong@princeton.edu

 

 

Curriculum Vitae

[CV]

 

 

Short Bio

[BIO]

 

 

Articles

1.     "A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets" (w/ Jeremy C. Stein;, Harvard University) Journal of Finance, December 1999.

 

2. "Trading and Returns under Periodic Market Closures" (w/ Jiang Wang, MIT) Journal of Finance, February 2000.

 

3. "Bad News Travels Slowly: Size, Analyst Coverage and the Profitability of Momentum Strategies" (w/ Terence Lim, Goldman Sachs and Jeremy C. Stein, Harvard University) Journal of Finance, February 2000.

 

4. "A Model of Returns and Trading in Futures Markets" Journal of Finance, April 2000.

 

5. "Security Analysts' Career Concerns and Herding of Earnings Forecasts" (w/ Jeffrey Kubik, Syracuse University and Amit Solomon, DJ Greene) Rand Journal of Economics, Spring 2000.

 

6. "Forecasting Crashes: Trading Volume, Past Returns and Conditional Skewness in Stock Prices" (w/ Joseph Chen, USC and Jeremy C. Stein, Harvard University) Journal of Financial Economics, September 2001.

 

7. "Strategic Trading and Learning about Liquidity" (w/ Sven Rady, University of Munich)
Journal of Financial Markets, November 2002.

 

8. "Breadth of Ownership and Stock Returns" (w/ Joseph Chen, USC, Jeremy Stein, Harvard University)
Journal of Financial Economics, November 2002.

 

9. "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts" (w/ Jeffrey Kubik, Syracuse University)
Journal of Finance, February 2003.

 

10. "Differences of Opinion, Short-Sales Constraints and Market Crashes" (w/ Jeremy C. Stein, Harvard University)
Review of Financial Studies, Summer 2003. (Previously circulated as "Differences of Opinion, Rational Arbitrage and Market Crashes")

 

11. "Social Interaction and Stock Market Participation" (w/ Jeffrey Kubik, Syracuse University and Jeremy Stein, Harvard University)
Journal of Finance, February 2004.

 

12. "Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization"
(w/ Joseph Chen, USC, Ming Huang, Stanford University, and Jeffrey D. Kubik, Syracuse University)
American Economic Review, December 2004.

 

13. "Talking up Liquidity: Insider Trading and Investor Relations" (w/ Ming Huang, Stanford University)
Journal of Financial Intermediation, January 2005.

 

14. "Thy Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trades of Money Managers" (w/ Jeremy C. Stein, Harvard University and Jeffrey D. Kubik, Syracuse University)
Journal of Finance, December 2005.

 

15. "Asset Float and Speculative Bubbles" (w/ Jose Scheinkman and Wei Xiong, Princeton University)
Journal of Finance, June 2006.

 

16. "Do Industries Lead Stock Markets?" (w/ Walter Torous, UCLA and Ross Valkanov, UCSD)
Journal of Financial Economics, February 2007.

 

17. "Simple Forecasts and Paradigm Shifts" (w/ Jeremy Stein, Harvard University and Jialin Yu, Columbia University)
Journal of Finance, June 2007.

 

18. "Disagreement and the Stock Market" (w/ Jeremy Stein, Harvard University)
Journal of Economic Perspectives, Spring 2007.

 

19. "Firms as Buyers of Last Resort" (w/ Jialin Yu, Columbia University and Jiang Wang, MIT)
Journal of Financial Economics, April 2008.

 

20. "Advisors and Asset Prices: A Model of the Origins of Bubbles" (w/ Jose Scheinkman and Wei Xiong Princeton University)
Journal of Financial Economics, August 2008.

 

21. "The Only Game in Town: Stock-Price Consequences of Local Bias" (w/ Jeffrey Kubik, Syracuse University and Jeremy Stein, Harvard University)
Journal of Financial Economics, October 2008.

 

22. "The Price of Sin: The Effects of Social Norms on Markets" (w/ Marcin Kacperczyk, NYU)
Journal of Financial Economics, July 2009.

Data for Hong and Kacperczyk Price of Sin: http://www.princeton.edu/~hhong/sinstocks.pdf

 

23. "Gone Fishin': Seasonality in Trading Activity and Asset Prices" (w/ Jialin Yu, Columbia University)
Journal of Financial Markets, November 2009.

 

24. "Competition and Bias" (w/ Marcin Kacperczyk, NYU)

Quarterly Journal of Economics, November 2010.

Program and Data for Hong and Kacperczyk Competition and Bias: http://pages.stern.nyu.edu/~sternfin/mkacperc/public_html/~mkacperc.htm

 

25. "Red and Blue Investing: Values and Finance" (w/ Leonard Kostovetsky, Rochester)

Journal of Financial Economics, February 2011.

Program and Data for Hong and Kostovetsky Red and Blue Investing: "Data on Money Manager Political Affiliation"

 

26. "Do Arbitrageurs Amplify Economic Shocks?" (w/ Tal Fishman, Princeton University and Jeffrey Kubik, Syracuse University)

Journal of Financial Economics, October 2011.

Price overshooting of good earnings news as short-sellers are forced to cut their positions.

Supplemental Appendix: "Internet Appendix for Arbs Amplify"

 

27. "What Futures Market Interest Tell Us About the Macroeconomy and Asset Prices?" (w/ Motohiro Yogo, Wharton)

Journal of Financial Economics, September 2012.

Changes in futures market open interest highly pro-cyclical and an unexpected and robust predictor of prices in commodity, currency, bond and stock markets.

Program and Data for Hong and Yogo What Futures Market Open Interest Tells Us About the Macroeconomy?: https://sites.google.com/site/motohiroyogo/home/publications/#AssetPricing

 

28. "Outsourcing Mutual Fund Management: Firm Boundaries, Incentives and Performance" (w/ Joseph Chen, USC, Wenxi Jiang, Yale University, Jeffrey Kubik, Syracuse University)

Journal of Finance, April 2013.

Funds with outsourced management significantly underperform funds ran internally by the family.

Supplemental Appendix: "Internet Appendix for Outsourcing"

 

29. "Quiet Bubbles" (w/ David Sraer, Princeton University)

Journal of Financial Economics, December 2013.

Supplemental Appendix: "Internet Appendix for QB"

Credit payoffs are less sensitive to disagreement about underlying asset value than equity since its upside is capped. Hence credit bubbles are quieter than equity bubbles---high price but lower price volatility and share turnover.

 

30. "Speculating on Home Improvements" (w/ Hyun-Soo Choi, Princeton University and Jose Scheinkman, Princeton University)

Journal of Financial Economics, March 2014.

Homeowners over-invest in home improvements because of speculative motive.

 

 

Forthcoming

 

31. "Yesterday's Heroes: Compensation and Risk at Financial Firms" (w/ Ing-Haw Cheng University of Michigan and Jose Scheinkman, Princeton University)

(REVISED! First Draft: July 2009, This Draft: December 27, 2013

This draft replaces an older draft titled, "Yesterday's Heroes: Compensation and Creative Risk-Taking"

Journal of Finance, forthcoming.

 

32. "Trading for Status" (w/ Wenxi Jiang, Yale University, Na Wang, Hofstra University, and Bin Zhao, Shanghai Advanced Institute for Finance)

(REVISED! First Draft: November 2011, This Draft: May 2014)

Households living in affluent Chinese cities trade small local stocks to Keep Up With The Wangs.

Review of Financial Studies, forthcoming.

 

33. "Regression Discontinuity and The Price Effects of Stock Market Indexing" (w/ Yen-cheng Chang, Shanghai Advanced Institute for Finance and Inessa Liskovich, Princeton University)

(REVISED First Draft: June 2011. This Draft: July 2013)

Small changes in market capitalizations for stocks around the Russell 1000 cut-off lead to discontinuous demand effects due to value-weighting of Russell Indices.

This draft replaces an older draft: "Rules and Regression Discontinuities in Asset Markets".

Program and Data for Chang, Hong and Liskovich Russell 2000 RD: "Program" and "Data". (Please read the Internet Appendix before running the RD. We include the end-of-May market-cap ranks, which are the ones that should be used for the fuzzy RD. We also include the end-of-June index weights provided by Russell Inc to show that using these end-of-June weights will severely inflate and bias the RD results.)

Review of Financial Studies, forthcoming.

 

 

Book Chapters and Comments

34. "Discusion Comments of Momentum and Stock Return Autocorrelation" (w/ Joseph Chen, USC)
Review of Financial Studies, March 2002.

 

35. "Transparency: Analysts' Career Concerns and Biased Forecasts,"
MBA in A Box, May 2004.

 

36. "Behavioral Finance: An Introduction to Special Issue of EFMJ,"

European Financial Management Journal, June 2007.

 

 

Working Papers

 

37. "Do Hedge Funds Profit from Mutual Fund Distress?" (w/ Joseph Chen, USC, Samuel Hanson, HBS, and Jeremy C. Stein, Harvard University)
(First Draft: September 2007, This Draft: April 2008)

 

38. "Stochastic Convenience Yield, Optimal Hedging and the Term Structure of Open Interest and Futures Prices"
(July 2001)

 

39. "Ordering and Revenue in Art Auctions" (w/ Jeffrey Kubik, Syracuse, Ilan Kremer, Stanford, Jianping Mei, NYU, Michael Moses, NYU)

(First Draft: June 2008, This Draft: April 2009)

 

40. "An Epidemiological Approach to Opinion and Price-Volume Dynamics" (w/ Dong Hong, Singapore Management University and Andrei Ungureanu, Princeton University)

(First Draft: March 2010)

The canonical network model of virus transmission embedded in a standard asset pricing and trading framework generates new insights on price momentum and earnings announcement drift.

 

41. "Financial Constraints on Corporate Goodness" (w/ Jeffrey D. Kubik, Syracuse University and Jose Scheinkman, Princeton University)

(NEW! First Draft: January 2011)

We solve the endogeneity problem that has plagued the corporate social responsibility literature: do firms do well by doing good or are they good because they do well?

 

42. "When Some Investors Head for the Exit" (w/ Wenxi Jiang, Yale University)

(NEW! First Draft: November 2011)

The exit rate of stocks among both equity and hedge funds is tied to binding short-sales constraints and forecasts low risk-adjusted expected returns.

 

43. "Do Managers Do Good With Other Peoples' Money?" (w/ Ing-Haw Cheng, University of Michigan and Kelly Shue, University of Chicago)

(REVISED! First Draft: November 2011, This Draft: August 2013)

Two quasi-experiments supporting agency hypothesis: (1) 2003 Dividend Tax Cut led to bigger drop in goodness scores for low compared to high insider ownership firms; (2) firms in which governance proposals just passed the 50% cut-off had slower growth of goodness scores compared to firms in which they just failed.

 

44. "Speculative Betas" (w/ David Sraer, Princeton University)

(REVISED! First Draft: December 2011, This Draft: August 2012)

When investors disagree about the path of the economy, investors disagree more about the cashflows of high beta than low beta stocks. Beta by magnifying aggregate disagreement leads to speculation and high prices for risky assets when the world is uncertain.

Program and Data for Hong and Sraer Speculative Betas: http://www.princeton.edu/~dsraer/replication.html

 

45. "Do Security Analysts Discipline Credit Rating Agencies?" (w/ Kingsley Fong, UNSW, Marcin Kacperczyk, NYU, Jeffrey D. Kubik, Syracuse University)

(REVISED! First Draft: December 2011, This Draft: December 2013)

Increasing security analyst coverage, which leads to less biased analyst forecasts by fostering competition, also leads to less biased credit ratings.

 

46. "When Real Estate is the Only Game in Town" (w/ Hyun-Soo Choi, Singapore Management University, Jeffrey D. Kubik, Syracuse University, Jeffrey Thompson, Federal Reserve Board of Governors)

(NEW! First Draft: January 2013, This Draft: December 2013)

Households living in cities with few publicly traded firms headquartered there are more likely to buy investment homes nearby, leading to higher price-to-rent ratios and lower (primary residence) home ownership rates.

 

47. "Does Diversity Lead to Diverse Opinions? Evidence from Languages and Stock Markets" (w/ Yen-Cheng Chang, Shanghai Advanced Institute for Finance, Larissa Tiedens, Stanford Graduate School of Business, and Bin Zhao, Shanghai Advanced Institute for Finance)

(NEW! First Draft: July 2013, This Draft: December 2013)

We provide evidence for an oft-cited premise that diverse societies grow faster than homogenous ones because they bring about diverse opinions that foster problem solving and creativity.

 

48. "Count Models of Social Networks in Finance" (w/ Jiangmin Xu, Princeton University)

(NEW! First Draft: December 2013)

We measure social networks in finance using Overdispersed Poisson Regression Models.

 

49. "Inflation Bets on the Long Bond" (w/ David Sraer, Princeton University and Jialin Yu, HKUST)

(NEW! First Draft: July 2014)

When investors disagree about the inflation, investors disagree more about the payoffs of the long bond than the short bond. Maturity by magnifying inflation disagreement leads to speculation and high prices for long term bonds when the world is uncertain.

 

50. "When Everyone Misses on the Same Side: Debiased Earnings Surprises and Stock Returns" (w/ Chin-Han Chiang, Singapore Management, Wei Dai, Dimensional Fund Advisors, Jianqing Fan, Princeton University, Jun Tu, Singapore Management)

(NEW! First Draft: July 2014)

A better measure of earnings surprises than the traditional consensus forecast error: more explanatory power for announcement-day returns and higher alphas for post-announcement earnings drift.

 

 

Other Links

www.sitejabber.com

 

 

 

� Harrison Hong / hhong@princeton.edu

Last updated: 03/05/2014