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There is now a CONTENT FREEZE for Mercury while we switch to a new platform. It began on Friday, March 10 at 6pm and will end on Wednesday, March 15 at noon. No new content can be created during this time, but all material in the system as of the beginning of the freeze will be migrated to the new platform, including users and groups. Functionally the new site is identical to the old one. webteam@gatech.edu
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Dear Faculty and Fellow Ph.D. Students,
I cordially invite you to attend my dissertation defense scheduled for Tuesday, April 28th from 1:30pm to 3:00pm on BlueJeans. Here is the BlueJeans link:
https://bluejeans.com/604624332
Please find the abstract below, and copies of the dissertation are available upon request.
Best Regards,
Fengrong Wei
Ph.D. Candidate in Finance
Scheller College of Business
Georgia Institute of Technology
Area: Finance
Committee members: Dr. Cheol Eun (Chair), Dr. Suzanne Lee, Dr. Alex Hsu, Dr. Soohun Kim, Dr. Vikas Agarwal (Georgia State University)
Title: Network Analysis of Stock Markets
Dissertation Overview:
Essay 1: Globalization of Local Factors: Implications for the Asset Pricing
We extend the analysis of globalization from the market factor to the rest of Fama-French factors and the Carhart momentum factor. The findings show that most of the sample local factors are significantly globalized, with the degree of globalization varying substantially across factors. Specifically, the market factor is the most globalized factor on average, followed by the momentum, size, value, profitability, and investment factors. In addition, we show that the impact of financial globalization has been imputed in the local factors, which explains the intriguing finding of integrated international asset pricing. That is, the local Fama-French factors outperform the global counterparts in pricing stocks, seemingly suggesting that stocks are priced as if financial markets were segmented despite the evident globalization. Our results indicate that this puzzle is attributable to the globalization of local factors.
Essay 2: Dynamic Firm-specific Network and Risk Diversification
We propose a system-wide approach to the study of the firm-specific connections, which capture the distinct relatedness between firms through unique features, conditional on the U.S. market. The proposed approach provides a new system-wide and factor-free measurement of market integration. We find that the degree of the firm-specific connections has decreased over time, and industry and style attributes significantly positively affect these connections. By applying these connections, investors can consistently gain through holding relatively few stocks randomly chosen across communities clustered based on these connections. Moreover, this consistency of gains has increased substantially over time, pointing to the importance of considering the firm-specific connections in risk diversification.
Essay 3: Holding-Linked Network in Mutual Funds and the Predictability of Fund Performance
We use holding-linked network of mutual funds, measured by the similarity between funds' portfolios, to examine the network predictability of fund performance and flows. Using the new network method, we find evidence of significant predictability between funds with similar holdings. The predictability persists three to six months for alternative performance measures and at least twelve months for fund flows. In addition, a long-short strategy based on these holding links yields a significant annual alpha of about 4.5%. These findings reflect the similar underlying drivers of funds' portfolio holdings and show the persistent prediction of fund performance and flows by the holding linked network.
