Publications
Learning in the Limit: Income Inference from Credit Extensions
05/2026 Online Appendix
Journal of Finance
Credit limit extensions significantly increase consumer expectations about future income growth. After controlling for the changes in consumer income expectations, the spending responses to credit limit extensions decrease by around 30%. The higher income expectations are likely driven by updated beliefs about labor demand instead of labor supply.
Investing in Lending Technology: IT Spending in Banking
with Zhiguo He, Sheila Jiang, and Douglas Xu, 05/2026
Management Science
Link banks' IT spending in various categories to different lending technologies. Investment in communication IT is associated more with improving banks' ability of soft information production and transmission, while investment in software IT helps enhance banks' hard information processing capacity.
Working Papers
Higher Order Beliefs and Risky Asset Holdings
with Yuriy Gorodnichenko, 04/2026 Online Appendix
Revise and Resubmit - American Economic Review
Combine a customized survey and randomized controlled trial (RCT) to study the effect of higher-order beliefs on U.S. retail investors’ portfolio allocations. Investors’ higher-order beliefs about stock market returns are correlated with but distinct from their first-order beliefs. The differences between the two vary systematically according to investor characteristics. An exogenous increase in first-order beliefs increases the portfolio share allocated to the stock market (risky assets), while an exogenous increase in higher-order beliefs reduces it.
Subjective Income Expectations and Household Debt Choices
with Francesco D'Acunto and Michael Weber, 05/2026
Reject and Resubmit - American Economic Review
After unexpected positive income shocks, consumers form excessively positive expectations about future income and debt capacity relative to the ex-post realizations. They end up raise debt to finance over-spending when income realization falls short. This subsequently increases their likelihoods of default. The effects are larger for lower-income consumers and consumers who face more volatile income streams.
Sentiment about Others
with Yukun Liu, 05/2026
Use large language models on 46 million StockTwits posts to separately measure investors’ own sentiment (first-order sentiment) and their beliefs about others’ sentiment (higher-order sentiment). References to others are pervasive and systematically more optimistic than investors’ own views. First-order sentiment is associated with higher retail buying, whereas higher-order sentiment predicts contrarian retail trading. Higher-order sentiment also forecasts short-horizon return continuation, particularly in environments with strong contrarian retail activity, consistent with liquidity provision by retail investors slowing price adjustment.
Buying the Dip in Retail Trading
with Dongchen Zou, 05/2026
Use a dataset that covers over 80% of retail trades in the US to document that retail traders buy the dip: retail flow rises significantly after price decline but is roughly flat after gains. The asymmtry holds across return horizon and is persistent across the sample periods. A structural estimation shows that higher retail share increases return volatility, especially after negative past return.
The Stress of Debt: Mortgage Refinancing and Labor Supply
with Martina Rocchi, 05/2026 Online Appendix
Combine a customized survey and quasi-experiment to study the effect of mortgage refinancing on labor supply, An exogenous reduction in monthly mortgage payments increases working hours, labor income, and spending, and reduces perceived stress levels at work. The effects are stronger for workers who are younger, have lower wealth or are more financial constrained before the experiment. Our results are concisitent with a higher debt level decreasing labor supply through a financial stress channel.
Banks that receive a large amount of firm hard information get better screening ability and make loans with lower default rates, and higher interest rates. This increases the profitability of the banks but has an insignificant impact on total lending volume. The effects are larger for banks with higher IT capacity. Consequently, high IT-capacity banks cream-skim high-quality borrowers from low IT-capacity banks.