Stock returns during the week are negatively associated with the reported incidence of domestic violence during the weekend. This relationship is primarily driven by negative returns. The incidence of domestic violence increases with the magnitude of losses, and the effect increases with local stock market participation. Our findings suggest that negative wealth shocks caused by stock market crashes can affect stress levels within intimate relationships, escalate arguments, and trigger domestic violence. Stock market losses may reduce household utility beyond the shock to financial wealth, supporting gain-loss models where disutility from losses outweighs the utility from gains of a similar magnitude.
- Ph.D., University of Amsterdam
- M.Phil., Tinbergen Institute
- M.B.A., National Chengchi University
- B.A., National Taiwan University
Professor Tse-Chun LIN received his Bachelor degree in Economics from National Taiwan University and MBA degree from National Chengchi University. He graduated with an M.Phil. in Economics from Tinbergen Institute in 2006. In 2009, he graduated from the Ph.D. program at the University of Amsterdam and joined The University of Hong Kong as Assistant Professor at HKU Business School. He was promoted to Associate Professor with tenure in 2015 and Professor in 2018.
Professor Tse-Chun LIN has been publishing his research in leading academic journals such as American Economic Review, Journal of Financial Economics, Review of Financial Studies, Journal of Accounting and Economics, Management Science, Journal of Financial and Quantitative Analysis, Review of Finance, etc. His research has also been featured in The Economist, WSJ, Bloomberg, and Investopedia, etc.
- Behavioral Finance
- Empirical Asset Pricing
- Financial Market
- The Disutility of Stock Market Losses: Evidence from Domestic Violence
Review of Financial Studies, forthcoming.
(with Vesa Pursiainen)
- Psychological Barrier and Cross-Firm Return Predictability
Journal of Financial Economics, 2021, Volume 142, Issue 1, Pages 338–356.
(with Shiyang Huang and Hong Xiang)
- Risk-neutral Skewness, Informed Trading, and the Cross-section of Stock Returns
Journal of Financial and Quantitative Analysis, 2021, Volume 56, Issue 5, Pages 1713–1737.
(with Tarun Chordia and Vincent Xiang)
- Does Short Selling Threat Discipline Managers in Mergers and Acquisitions Decisions?
Journal of Accounting and Economics, 2019, Volume 68, Issue 1, Article 101223.
(with Eric C. Chang and Xiaorong Ma)
- Contractual Managerial Incentives with Stock Price Feedback
American Economic Review, 2019, Volume 109, No. 7, Pages 2446–2468.
(with Qi Liu and Bo Sun)
- Attention Allocation and Return Co-Movement: Evidence from Repeated Natural Experiments
Journal of Financial Economics, 2019, Volume 132, Issue 2, Pages 369–383.
(with Shiyang Huang and Yulin Huang)
- Ex-day Returns of Stock Distributions: An Anchoring Explanation
Management Science, 2019, Volume 65, Issue 3, Pages 1076–1095.
(with Eric C. Chang, Yan Luo, and Jinjuan Ren)
- Skewness, Individual Investor Preference, and the Cross-Section of Stock Returns
Review of Finance, 2018, Volume 22, Issue 5, Pages 1841–1876.
(with Xin Liu)
- Do Superstitious Traders Lose Money?
Management Science, 2018/08, Volume 82, Issue 8, Pages 3772–3791.
Featured in The Economist
(with Utpal Bhattacharya, Wei-Yu Kuo, and Jing Zhao)
- How Do Equity Lending Costs Affect Put Options Trading? Evidence from Separating Hedging and Speculative Shorting Demands
Review of Finance, 2016, Volume, 20, Issue 5, Pages 1911–1943.
(with Xiaolong Lu)
- Why Does the Option to Stock Volume Ratio Predict Stock Returns?
Journal of Financial Economics, 2016, Volume 120, Issue 3, Pages 601–622.
(with Li Ge and Neil Pearson)
- Informational Content of Options Trading on Acquirer Announcement Return
Journal of Financial and Quantitative Analysis, 2015, Volume 50, Issue 05, Pages 1057–1082.
(with Konan Chan and Li Ge)
- Do Individual Investors Treat Trading as a Fun and Exciting Gambling Activity: Evidence from Repeated Natural Experiments
Review of Financial Studies, 2015, Volume 28, Issue 7, Pages 2128–2166.
(with Xiaohui Gao)
- Cognitive Limitation and Investment Performance: Evidence from Limit Order Clustering
Review of Financial Studies, 2015, Volume 28, Issue 3, Pages 838–875.
(with Wei-Yu Kuo and Jing Zhao)
- How the 52-week High and Low Affect Option-implied Volatilities and Stock Return Moments
Review of Finance, 2013, Volume 17, Issue 1, Pages 369–401.
(with Joost Driessen and Otto van Hemert)
- A New Method to Estimate Risk and Return of Non-traded Assets from Cash Flows: The Case of Private Equity Fund
Journal of Financial and Quantitative Analysis, 2012, Volume 47, Issue 1, Pages 511–535.
(with Joost Driessen and Ludovic Phalippou)
We provide a psychological explanation for the delayed price response to news about economically linked firms. We show that the return predictability of economically linked firms depends on the nearness to the 52-week high stock price. The interaction between news about economically linked firms and the nearness to the 52-week high can partially explain the underreaction to news about customers, geographic neighbors, industry peers, or foreign industries. We also find that analysts react to news about economically linked firms but the 52-week high effect reduces such reactions, providing direct evidence that the 52-week high affects the belief-updating process.
What could be the result if some compelling opportunities, like lottery jackpots, were potentially lucrative enough to distract the investors' attention from monitoring the stock market?
We identify an important channel, acquisitions of public targets, via which the governance through trading (GTT) improves firm values. The disciplinary effect of GTT is more pronounced for firms with higher managerial wealth-performance sensitivity and moderate institutional ownership concentration. Firms with higher GTT also have higher subsequent ROA, ROE, Tobin's Q, analysts forecasted EPS growth rate, and lower expected default risk. The effect is stronger after Decimalization and robust to using two instrumental variables. We conduct several exercises to rule out alternative explanations, such as institutional superior information, investor activism, and momentum. Additional tests show that the disciplinary effect of GTT only exists for less financially-constrained firms and non-all-cash M&As where the agency problem is more likely to be prevalent.
We explore the governance effect of short-selling threat on mergers and acquisitions (M&A). We use equity lending supply (LS) to proxy for the threat, as short sellers incentives to scrutinize a firm depend on the availability of borrowing shares. Our results show that acquirers with higher LS have higher announcement returns. The effect is stronger when acquirers are more likely to be targets of subsequent hostile takeovers and when their managers wealth is more linked to stock prices. We conduct four sets of tests to mitigate endogeneity concerns. Finally, the governance effect exists only for deals prone to agency problems.
We study the effect of financial market frictions on managerial compensation. We embed a market microstructure model into an otherwise standard contracting framework, and analyze optimal pay-for-performance when managers use information they learn from the market in their investment decisions. In a less frictional market, the improved information content of stock prices helps guide managerial decisions and thereby necessitates lower-powered compensation. Exploiting a randomized experiment, we document evidence that pay-for-performance is lowered in response to reduced market frictions. Firm investment also becomes more sensitive to stock prices during the experiment, consistent with increased managerial learning from the market.
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.
The research study by Professor Tse-Chun Lin, Professor of Finance and his Ph.D. student Vesa Pursiainen is covered by a number of regional and international media.
We offer a new anchoring explanation for the ex-day abnormal returns of stock distributions, including stock dividend distributions, splits, and reverse splits. We propose that investors tend to anchor on cum-day prices in valuating ex-distribution stocks, resulting in a positive association between ex-day returns and adjustment factors. We find that this positive return-factor relation exists for all three types of stock distributions and in both the pre- and post-decimalization periods. Furthermore, we find that this positive return-factor relation is more pronounced among events that are more subject to investors’ anchoring propensity, featured by less investor attention, greater arbitrage difficulty, greater valuation uncertainty, less investor sophistication, and higher market sentiment. Last, using brokerage account data, we show that stocks that are traded by investors with more investment experience demonstrate a weaker return-factor relation.