Dr Jungsuk Han, Stockholm School of Economics (SSE)
Will arbitrage capital flow into a market experiencing a shock, mitigating the adverse effect of the shock on price efficiency?
Using a stochastic dynamic equilibrium model with privately informed capital-constrained arbitrageurs, we show that informed capital may actually flow out of that market. The remaining informed capital in the market becomes trapped because pricing becomes too inefficient for informed arbitrageurs to want to close out their positions.
This mechanism creates endogenous liquidity regimes under which temporary shocks can trigger flight-to-liquidity resulting in “liquidity hysteresis” which is a persistent shift in market liquidity and price informativeness.
Speaker bio
Jungsuk Han is an Associate Professor of Finance at the Stockholm School of Economics (SSE). He obtained his doctoral degree in 2010 at London Business School, and joined the Finance department at the SSE in 2010.
He is teaching Portfolio Choice and Asset Pricing at the SSE MSc in Finance programme, and Asset Pricing Theory at the SSE PhD in Finance programme. His research is focused on asset pricing with imperfect information, market microstructure, financial intermediation, and limits to arbitrage.
His work has been published in academic journals like Journal of Finance, Journal of Financial Economics, Journal of Economic Theory, and Management Science.
He was awarded the Brattle Group Prize Distinguished Paper Award for 2019.
Event timings
Date:
12 February 2019
Start Time:
12:30
End Time:
14:30