Research

Abstract: This paper proposes a novel channel for households’ choices of risky asset allocation: more intra-household risk sharing reduces labor income risk for dual-earner couples, thus encouraging households’ financial risk-taking. Capturing intra-household risk sharing by conditional income correlation between spouses’ industries, I find that more income risk sharing within couples increases households’ financial risk-taking. Using unexpected events of spousal death, I causally identify the impact of intra-household risk sharing on households’ portfolio choices. My study implies an unintended consequence of positive assortative mating for wealth inequality by discouraging disadvantaged households’ financial risk-taking.

Abstract: We exploit a policy reform that exogenously deteriorates mothers’ job prospects. China switched from a one-child policy to two-child in 2016, which increased female workers’ childbearing and caring responsibilities. Using a leading peer-to-peer lending platform targeting college students in China, we find that loan applications from female college students decrease by 15.6% relative to male students after the reform. The drop suggests that female students can anticipate the poorer future job prospects; they reduce their expenditure and invest less in human capital accordingly. Applications for long-term and large-amount loans and loans for human capital investment purposes experience the largest decline. We also find that loan applications decrease after provincial governments’ staggered extension of maternity leaves and that the decrease is more prominent when the expected motherhood penalty is greater. The results are unlikely driven by credit supply channels.

Abstract: 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.

Abstract: Motivated by the growing importance of the Chinese domestic economy for the global economic condition, we test whether the consumption risk of China matters for the cross-section of U.S. equity returns. We find that the two-factor international asset-pricing model with both U.S. and Chinese consumption risk explains 40% of the cross-sectional variation in U.S. equity returns. We also find a sizable risk premium of 7.08% per annum. This finding is robust to different estimation approaches, portfolio groups, controlling for other equity factors, and using individual equities. For economic mechanism, we find that it is the discount rate channel that is related to investors' risk aversion, sentiment, and economic uncertainty through which Chinese consumption matters for the U.S. equity returns. Also, the result is not entirely driven by Chinese investors participating in the U.S. Overall, we present equity market-based novel evidence of the importance of Chinese macro fundamentals for the U.S.