Changhao ZHANG

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Candidature: 5th year
Department: Finance
Research interest: Financial econometrics, Systemic Risk, Information and News
Advisor: Professor Duan Jin-Chuan

Oral defence Paper Title:
Global Systemically Important Financial Institutions: A Structural VAR Approach

Oral defence Paper Abstract:
Systemic importance of a financial institution is measured as the additional tail loss induced into the system when the financial institution falls into distress due to its own structural shocks. The use of a structural approach is a step towards addressing a key concern in systemic risk literature, "Is the firm impacting the market, or is the market impacting the firm?" The identification exploits "too-big-to-fail" restrictions which are implicitly imposed when a dynamic factor model is assumed, and the data reveals "too-interconnected-to-fail", thereby incorporating the two key considerations of systemic importance. Over 21,000 firms listed globally are modelled jointly as a system. Even though we use only public data, the model's output relates to actual bailout events, and also reflects interactions of firms linked to the same supply chain. In addition, we show how Basel's list of global systemically important banks can be interpreted in our framework.

Man ZHANG

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Candidature: 5th year
Department: Finance
Research interest: Household Finance, Behavioral Finance and Real Estate Economy
Advisor: Professor Sumit Agarwal

Oral defence Paper Title:
Consumption and Saving Response to Income Tax Exemption Policy: Evidence from India

Oral defence Paper Abstract:
In July 2014, the Indian government raised the income tax exemption limit for the long-term saving instruments (e.g., mortgage debt principal repayment) by 50,000 Indian Rupee (US$833), providing us with an exogenous quasi-experiment to identify the impact of the tax-subsidized saving policy. I estimate the impact of the policy change on Indian household consumption using a unique administrative panel data of consumer debit card and credit card spending transactions. To take advantage of the financial benefit provided by the increase in the income tax exemption limit, I find that about 21.54 % of the home loan owners increase the principle repayment for their home loan and the average level of the incremental amount is 16,425 India Rupee in the next year following the policy change. Relative to consumers without a mortgage, those with a mortgage reduce their consumption on average by 11,593 Indian Rupee (US$193) by the end of the fiscal tax year FY2014, with similar consumption reduction persisting in FY2015. The effect on consumption is more pronounced for male, young, single and low-income individuals.

Xin ZOU

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Candidature: 5th year
Department: Finance
Research interest: Household Finance, Behavioral Finance, Banking and Corporate Finance
Advisor: Professor Sumit Agarwal

Oral defence Paper Title:
Extracting Consumer Demand: Credit Card Spending and Post-Earnings Returns

Oral defence Paper Abstract:
Using proprietary individual transaction-level data from a large financial institution, this paper examines the information content of consumer (credit card) spending in explaining stock returns. After controlling for the quarterly earnings and sales surprises, the paper finds a positive relation between the spending surprise on a firm's product during a fiscal quarter and the subsequent cumulative abnormal returns. One inter-quintile increase in the spending surprise leads to one percentage point increase in the 60-day post-earnings-announcement CAR. The predictive power is concentrated in firms with more sales from high-spending-capacity consumers, firms with a more diversified consumer base, and firms in consumer-oriented industries. Moreover, credit card spending surprise predicts future earnings and sales surprises over the next four quarters. Findings in this paper suggest that the disaggregated consumer spending provides a more accurate and persistent signal of consumer demand that is relevant to a firm's growth potential and stock pricing.