This paper shows that a New Year’s gambling preference of individual investors impacts prices and returns of assets with lottery features. January call options, especially the out-of-the-money calls, have higher retail demand and are the most expensive and actively traded. Lottery-type stocks outperform their counterparts in January but tend to underperform in other months. Retail sentiment is more bullish in lottery-type stocks in January than in other months. Furthermore, lottery-type Chinese stocks outperform in the Chinese New Year’s Month but not in January. This New Year effect pro- vides new insights into the broad phenomena related to the January effect.

Prior literature shows that implied volatility spreads between call and put options are positively related to future underlying stock returns. In this paper, however, we demon- strate that the volatility spreads are negatively related to future out-of-the-money call option returns. Using unique data on option volumes, we reconcile the two pieces of evidence by showing that option demand by sophisticated, firm investors drives the posi- tive stock return predictability based on volatility spreads, while demand by less sophis- ticated, customer investors drives the negative call option return predictability. Overall, our evidence suggests that volatility spreads contain information about both firm funda- mentals and option mispricing.

Based on high-frequency data of China's commodity market from 2017 to 2022, this article examines the intraday momentum effect. The results indicate that China's commodity futures and options have significant intraday reversal effects, and the overnight opening factor and opening to last half hour factor are more significant. These effects are driven, in part, by liquidity factors. This trend aligns with market makers' behavior, passively accepting orders during low liquidity and actively closing positions amid high liquidity. Furthermore, our examination of cross-predictive ability shows strong futures-to-options predictability, while the reverse is weaker. We posit options traders' Vega hedging as a key factor in this phenomenon, our study finds futures volatility changes can predict options’ return.

Using subsidiary-level data of 3,863 Chinese nonfinancial listed firms, we find their capital expenditures increase with foreign sales, and the difference arises from the investments of the firms’ foreign subsidiaries. We show that the foreign sales-foreign investment association becomes more sensitive when the economic policy uncertainty (EPU) increases in the domestic market. However, foreign EPU does not play such a significant role. We provide one possible explanation that due to global diversification, MNEs can hedge foreign EPU using their international subsidiary network, resulting in the overall investments unchanged. However, given China’s tight regulatory capital controls, the MNEs may be less able to hedge the domestic EPU, so that they reallocate investments from the domestic markets to the foreign markets, consistent with the transaction cost assumption underlying the real options theory. Robust tests show that access to foreign capital, profitability and institutional factors have little explanatory power over the MNEs’ foreign investment.

This paper studies a novel channel through which climate risks affect households’ choices of risky asset allocation: a stringent climate change regulation elevates labor income risk for households employed by high-emission industries which in turn discourages households' financial risk-taking. Using staggered adoptions of climate change action plans across states, we find that climate change action plans lead to a reduction in the share of risky assets by 15% for households in high-emission industries. We also find a reduction in risky asset holdings after the stringent EPA regulation. These results are stronger with experiences of climate change-related disasters. Our study implies an unintended consequence of climate regulations for wealth inequality by discouraging low-wealth households' financial risk-taking.

This paper will partially solve the puzzle of implied volatility spreads from the perspective of short-selling (option-implied borrowing rate). Specifically, we use Chinese SSE 50 ETF options data to examine the relationship between the option-implied volatility spreads and option-implied borrow rate. Using nonparametric regression models, we find that there is a clear negative correlation between the implied volatility spreads and the implied borrowing rate. Furthermore, our results show that there is a significant nonlinearity between these two variables. Finally, it is interesting to note that the option volatility spreads are zero when the option prices include the short selling cost.

From 2013 onwards, the Chinese central government has subjected the largest state-owned enterprises (SOEs) to ‘disciplinary inspections’ to weed out and punish graft and other corruption. While this policy has been somewhat successful in punishing corruption—over 160 top SOE officials have been indicted—we show that the principal economic impact of these inspections has been to significantly cut investment by targeted firms, leading to a major decline in profitability, innovation and Tobin’s Q. Expenditures on R&D, entertainment, and travel also decline dramatically. The most obvious explanation is that the fear induced in SOE managers, who have limited risk-promoting equity holdings or incentive compensation and few external employment options, deterred them from taking risky but value-enhancing investments post-audit.

Declining worker bargaining power has been advanced as an explanation for dramatic generational changes in the U.S. macroeconomic environment such as the substantial decline in labor’s share of the national income, the loss of consumer purchasing power, and growing income and wealth inequality. In this paper, we investigate microeconomic implications by examining the effect of declining worker power on firm-level investment responses to a labor cost shock (mandated increases in the minimum wage). Over the past four decades, we find that investment-wage sensitivities go from negative to insignificant as management becomes less constrained and can pursue outside options. Consistent with drivers of weakening worker power, investment-wage sensitivity changes are more significant for firms that are more exposed to globalization, technological change, and declining unionization.

The past decade has witnessed a phenomenal rise of digital wallets, and the COVID-19 pandemic further accelerated their adoption globally. Such e-wallets provide not only a conduit to external bank accounts but also internal payment options, including the ever-popular Buy-Now-Pay-Later (BNPL). We examine, for the first time, e-wallet transactions matched with merchant and consumer information from a world-leading provider based in China, with around one billion users globally and a business model that other e-wallet providers quickly converge to. We document that internal payment options, especially BNPL, dominate both online and on-site transactions. BNPL has greatly expanded credit access at the extensive margin through its adoption in two-sided payment markets. While BNPL crowds out other e-wallet payment options, it expands FinTech credit to underserved consumers. Exploiting a randomized experiment, we also find that e-wallet credit through BNPL substantially boosts consumer spending. Nevertheless, users, especially those relying on e-wallets as their sole credit source, carefully moderate borrowing when incurring interest charges. The insights likely prove informative for economies transitioning from cash-heavy to cashless societies where digital payments and FinTech credit see the largest growth and market potential.

This study is the first to examine China’s crude oil options market. Using high-frequency data and three different price discovery measures, we conduct a rigorous analysis and find that after its first 8 months of operation, China’s crude oil options market has already played an important role in price discovery. Factors such as volume, volatility, and speculation can impact its price discovery ability. We also find a unique phenomenon in China’s crude oil derivatives market, namely that speculative activity mainly occurs in the futures market and adds to the price discovery of the futures market rather than to the options