RAN SHI

Ran Shi

Assistant Professor of Finance, University of Colorado Boulder

Email:

Research Interest: Asset Pricing, International Finance, Financial Economics


Curriculum Vitae


Working Papers


Conditional Asset Pricing with Text-Managed Portfolios (with Jian Feng, Jiantao Huang and Shiyang Huang)
We construct managed portfolios that exploit information extracted from firms’ earnings call transcripts and examine their asset pricing implications. Returns on these text-managed portfolios correlate with investor sentiment and predict macroeconomic outcomes. Individual stocks’ exposures to the text-managed portfolios explain as much return variation as those to the characteristics-sorted portfolios. Adding earnings call information to firm characteristics increases mean-variance efficiency, though it does not improve stock-level return predictability. Consistent with the insights from Kozak and Nagel (2024) on mean-variance spanning, our results suggest that earnings calls provide information about return covariances beyond what is captured by firm characteristics alone.


Forecasting Crashes with a Smile (with Ian Martin)
Jack Treynor Prize
We use option prices to derive bounds on the probability of a crash in an individual stock, and argue that the lower bound should be close to the truth. Empirically, we find that the lower bound is a highly successful predictor of crashes, both in and out of sample; on its own, it outperforms 15 stock characteristics proposed by the prior literature combined. In a multivariate regression, a one standard deviation increase in the bound raises the predicted crash probability by 3 percentage points, whereas a one standard deviation increase in the next most important predictor (a measure of short interest) raises the predicted probability by only 0.3 percentage points.


A Quantitative Model of Limited Arbitrage in Currency Markets: Theory and Estimation
I develop and estimate a limits-to-arbitrage model to quantify the effects of financial constraints, arbitrage capital, and hedging demands on asset prices and their deviations from frictionless benchmarks. Using foreign exchange derivatives price and quantity data, I find that varying financial constraints and hedging demands contribute to 46 and 35 percent variation in the deviations from covered interest parity of one-year maturities. While arbitrage capital fluctuation explains the remaining 19 percent of variation on average, it periodically stabilizes prices when the other two forces exert disproportionately large impacts. The model features a general form of financial constraints and produces a nonparametric arbitrage profit function. I unveil the shapes and dynamics of financial constraints from estimates of this function.


Publication


Model Uncertainty in the Cross Section of Stock Returns (with Jiantao Huang) Journal of Econometrics, accepted


The Spread of COVID-19 in London: Network Effects and Optimal Lockdowns (with Christian Julliard and Kathy Yuan) Journal of Econometrics (2023), 235:2:2125-2154


Teaching

FNCE 3030 - Investment and Portfolio Management (Spring 2023, Fall 2023, 2024)
FNCE 7020 Research Topics (Empirical Asset Pricing) (Spring 2024)