Semester

Spring

Date of Graduation

2022

Document Type

Thesis

Degree Type

PhD

College

Chambers College of Business and Economics

Department

Finance

Committee Chair

Naomi Boyd

Committee Co-Chair

He (Helen) Wang

Committee Member

Victor (Kewn) Chow

Committee Member

Ruiyuan Chen

Committee Member

Feng Yao

Abstract

This thesis models and explores agents’ decisions in reaction to events that serves to increse the heterogeneity among agents. The analysis is conducted on three aspects of financial economics. In chapter 2, we empirically examine how trading by peers on a new platform influences others’ adoption decision. We model the adoption process and find the relationship to be U-shaped, with first movers greatly discouraging their peers from adoption, while late movers slightly discouraging or encouraging their peers.

In chapter 3, we investigate how managerial incentives influence corporate social responsibility (CSR). We examine the staggered adoption of corporate opportunity waiver laws (COW) across different states as an exogenous shock that has the potential to weaken the alignment between managers and shareholders.. We find that CSR decreases significantly after the passage of the opportunity waiver laws, which consistent with the delegation view. The drop in CSR performance is more pronounced for firms with weaker corporate governance, and for industries with better growth opportunities. Taken together, our results indicates that CSR activities are the outcome of well-governed managerial decisions.

In chapter 4, we construct a hidden risk index which increases when call option prices are lower than the level indicated by the empirical distribution of underlying asset. We find the hidden risk index can predict underlying returns across the timeseries and cross sectionally. Stocks with a high hidden risk index earn significantly lower returns than stocks with low hidden risk index.

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