Jane Chen

Hi! I am a PhD candidate in Finance at the London School of Economics. My research fields are Asset Pricing and Financial Intermediation. I will be on the job market in academic year 2022-2023.

Contact: j.chen76[at]lse.ac.uk

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Working Papers

See it, Say it, Shorted: Strategic Announcements in Short-Selling Campaigns (Job Market Paper)

SFS Cavalcade North America 2023 (scheduled)

I study how hedge funds strategically disclose their private information during short-selling campaigns. Using data on hedge funds' voluntary announcements and daily short positions in the EU market, I document the existence of two groups of funds: Announcers and Followers. Announcers, typically small and young, (1) establish short positions, (2) publish research reports about short targets, and (3) realise profits from the falling price within a short time frame. Followers, usually large, enter at the release of the report and increase their short positions even after announcers exit. To understand strategic interaction among short sellers, I provide a model to explain how size affects a short seller’s incentive and behaviour. Small funds benefit more from disclosing when facing binding leverage constraints. In contrast, large funds profit from others’ private information by offering capital to price discovery. Moreover, I characterize the effect of such short-selling campaigns on market efficiency.

The Economics of Mutual Fund Marketing, with Wenxi Jiang and Mindy Z.Xiaolan

SFS Cavalcade North America 2023 (scheduled), AFA 2023

We uncover a significant relationship between the persistence of marketing employment strategy and fund performance in the U.S. mutual fund industry. Using regulatory filings, we show a large heterogeneity in fund companies' marketing employment share, which refers to the fraction of employees devoted to marketing and sales. Not only does the marketing employment share increase in family size and predict subsequent fund flows, but it is also persistent across fund families. A framework based on Bayesian persuasion and costly learning helps explain the observed strategic marketing decision. Regarding an optimal marketing plan, fund companies with different skill types commit to heterogeneous marketing employment strategies. Conditional on the skill level, fund companies' optimal marketing employment share responds to their past performance differently. Low-skill funds only conduct marketing following good-enough past performance whereas high-skill funds maintain a high marketing employment share even with very poor past performance. Consistent with the model prediction, we show that the volatility of the marketing ratio is negatively correlated with the long-term performance of fund companies.