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A novel high magnetic Fe-6.5%Si alloy with B 8 1.74T was prepared by the method of twin-roll strip casting. The results showed that a sea of Σ3 grain boundaries from the {112} twin boundary were discovered in the FCC solidified microstructure without phase transition, where the solidified embryo ratio was over 20 %. In addition, strengthening grain boundary with inhibitors, some Σ3 grain boundaries were maintained from the process of warm rolling-cold rolling-annealing and transformed into a complete Goss microstructure with the accurate orientation, leading to achieving a good magnetic property.

We examine the dynamic ownership structure of corporate bonds after initial issuance. We find that as bonds “season”, the market learns more about them. This learning leads to less concentrated bond ownership over time. Specifically, learning induces a shift in bond ownership from more informed short-term investors to less informed long-term investors. This shift in ownership is accompanied by reduced trading volume and lower expected returns. Utilizing firm-level credit rating reports from Standard & Poor’s, we identify that the source of learning is related to macro- and industry-level information and the term structure of interest rate rather than firm-level cash flow news. Our results suggest that regulations that facilitate easier access to information and better learning, such as centralizing corporate bond trading, could encourage more participation and benefit a wider spectrum of investors.

We find that higher stock lending fees predict significantly lower future returns after controlling for shorting demand for U.S. stocks during the period 2007–2010. These results suggest that active institutional investors on the supply side play an important role in the return predictability of fees and they not only respond to demand but also price in additional information around earnings news announcements. Overall, we find evidence that stock lenders are informed and, together with short sellers, contribute to the price discovery process.

We examine the predictive power of CDS-bond basis for future corporate bond returns. We find that residual basis, the part of the CDS-bond basis that cannot be explained by a wide range of market frictions such as counterparty, funding, and liquidity risk, strongly negatively predicts excess returns at the 20-day horizon. Controlling for systematic risk factors including credit risk and liquidity risk, a bond portfolio formed on the residual basis generates a significant abnormal bond return of 1.79%. The abnormal returns due to the residual basis reflect mispricing rather than missing systematic risk factors. These results are robust to different horizons or sample periods or various characteristics of bonds. Overall, our results imply a beneficial role of CDS in the bond market as the existence of mispricing between CDS and bonds results in subsequent price convergence in bonds.

We show that traditional western style corporate governance tools are ineffective in Chinese real estate firms by using data from 2000 to 2012. Instead, we find evidence of effective state governance, such as corruption cleanups and financial market liberalization. Specifically, firms with fewer state connections experience better performance in provinces with greater corruption prosecutions and after 2006 with accelerated stock market liberalization. Overall, our results suggest that the Chinese real estate industry is becoming more market-oriented with assistance from the state.

We explore how efficiently new information transmits along the supply chain in corporate bond market. We find a strong predictability of the lagged bond returns of customers for related firm- and industry-level future bond returns. This is likely due to investors’ inattention to cash-flow related news along the supply chain. Moreover, the lagged bond returns of suppliers only predict the future bond returns of those firms that have less bargaining power. Overall, our results suggest that information along the supply chain travels more gradually in the bond market than the stock market.

In a sample of U.S. stocks, higher stock lending fees predict significantly lower excess returns beyond shorting demand and loan supply. This relation is stronger after October 2008 which is likely attributable to a regime shift in the lending market with the onset of the Global Financial Crisis. We show that active institutional lenders not only respond to demand but also price in private information around earnings news announcements. As lenders raise fees before negative announcement in expectation of higher future shorting demand, they likely create more binding short-sale constraints when short selling could be essential for price discovery.

We examine whether Standard & Poor’s (S&P) credit rating action reports contain new default-related information beyond credit rating actions such as rating changes, credit watch, and outlooks. We find that the net linguistic tone (negative minus positive tone) in the reports is significantly and negatively related to abnormal returns and predicts future rating changes. We discover that the provision of tone does not seem to be inflated by the conventional proxies of conflict of interest faced by S&P, as higher conflict of interest is related to more negative net tone. Moreover, the tone can predict future rating changes even when conflict of interest is high. Overall, our study reveals novel evidence on the information value of credit rating action reports. This paper was accepted by Wei Jiang, finance.

The developing Chinese economy has gone through significant market reforms in recent decades. After scanning through more than 100 financial market liberalization policies from 1999 to 2009, we discover that Chinese policymakers are purposefully taking a policy experimentation approach in making new policies, whereby many policies are reversed and re-launched. Intrigued by such a bold policymaking approach, we explore the rationale behind these policy flip-flops. We find that the policymakers are often torn between promoting economic growth and reducing excessive volatility associated with growth. By employing the Chinese interbank repo rates, we propose a simple empirical procedure to evaluate the policy shift on a timely and objective basis. We believe that the Chinese lesson is valuable for other developing economies that are in dire need of promoting economic growth through good policymaking.

We test whether policy uncertainty affects international equity returns. We construct two measures of global policy uncertainty based on the ratings from international country risk guide. They capture the potential policy shock from government changes and the bureaucratic ability to reduce policy shocks. Both factors significantly affect equity returns in 49 countries from 1995 to 2006 and the bureaucratic factor carries an annual risk premium of 8 percent. The economic and institutional conditions within a country affect the return relation with the policy uncertainty. Overall, our study reveals the significance and distinct characterization of policy uncertainty in international equity markets.

Akerlof proposes that the norms of decision makers can bridge the gap between New Classical economic theories and conflicting empirical evidence. We apply his framework to cross‐country capital structure decision making and propose a norm theory of capital structure. Consistent with its predictions, we find that two principal components that represent the manager–subordinate relationship and the manager–environment relationship in a national culture are significantly and negatively related to the median leverage ratio at the country level. This study is among the first to provide a direct link between national culture and capital structure as made operational through managerial norms.

We examine how policy instability is priced in interest rates. Policy instability refers to the likelihood that the current policy will be changed in the future in the absence of political power shifts. Chinese government’s experimental policymaking approach provides an ideal set of frequent policy flip-flops which allows us to identify the effect of policy changes. Conditional on the bureaucratic quality of policymaking, a good-quality policy reversal is related to reductions in interest rate term spread and volatility; a bad-quality policy reversal is related to increases in the spread and volatility. The bureaucratic quality is multi-dimensional and the moderating effect is stronger on interest rates when it is measured more precisely.

The CDS/Bond basis trade has played an important role in the current financial crisis. Many banks and hedge funds, such as Deutsche Bank, Merrill Lynch, and Citadel, have lost billions of dollars in this trade. The widening of the basis has also created significant disruptions in the credit market. In this paper, we provide a comprehensive empirical analysis on the CDS/bond basis and the impact of the basis on expected corporate bond returns. We construct the basis based on CDS spreads from Markit and bond prices from TRACE and NAIC from 2001 to 2008. We find that on average the basis of investment grade bonds is negative during our entire sample and that bonds with lower basis tend to be older and have lower rating, longer maturity, higher duration and convexity. We also find that low basis bonds tend to have higher future returns than high basis bonds and that the basis can predict future returns of individual bonds and bond portfolios. Most important, we find that the basis factor, constructed as the return differential between low and high basis portfolios, helps explaining the cross-sectional differences in the expected returns of corporate bonds even after controlling for most known systematic risk factors.

We present a new approach to portfolio optimization by separating asset return distributions into positive and negative half-spaces. The approach minimizes a so-called Partitioned Value-at-Risk (PVaR) measure by using the statistical information from the two half-spaces respectively. We show that the proposed PVaR approach is a signiflcant improvement in several important aspects when compared to Markowitz mean-variance optimization approach. First, our approach, which accommodates ambiguous asymmetric return distributions and captures portfolio risk in higher moments, does not require asset distributions being elliptically symmetric or multivariate normal. Second, using simulated and real data, our approach generates better risk-return tradeofis in the optimal portfolios. The difierence between the two approaches increases in the degree of asymmetry in the underlying asset distributions. Third, when given the support of asset returns, our PVaR measure becomes a coherent risk measure proposed by Artzner et al. (1999) whereas conventional risk measures such as variance and VaR fail to do so. Moreover, our PVaR measure is an asymmetric risk measure, which is difierent from symmetric risk measures like variance and worst-case mean-covariance VaR (WVaR). Therefore, our proposed PVaR is a signiflcant addition to the existing portfolio risk measures. We believe that the PVaR approach can be very useful for better portfolio allocations than the mean-variance or other symmetric risk-metrics approach during market downturns when asset return distributions are often fat-tailed or skewed.