Juan (Julie) Wu

Dept. of Banking & Finance

Terry College of Business, University of Georgia

Athens, GA 30602, USA

Office: (706) 542-0934; Fax: (706) 542-9434

Email:

ACADEMIC EMPLOYMENT

  • 2008- Assistant Professor of Finance, Terry College of Business, University of Georgia

EDUCATION

  • Ph.D. Finance (2007), Mays Business School, Texas A&M University

RESEARCH PAPERS

  • International Evidence on Algorithmic Trading (with Ekkehart Boehmer and Kingsley Fong)

We use a large sample from 2001-2009 that incorporates 39 exchanges and an average of 12,800 different common stocks to assess the effect of algorithmic trading (AT) intensity on liquidity in the equity market, short-term volatility, and the informational efficiency of stock prices. We exploit the first availability of co-location facilities to identify the direction of causality. We find that, on average, greater AT intensity improves liquidity and informational efficiency, but increases volatility. The volatility increase is robust to a range of different volatility measures and it is not due to more "good" volatility that would arise from faster price discovery. These patterns are widespread and are not limited to a few markets, but they vary in the cross-section of stocks. In contrast to theaverage effect, more AT reduces liquidity in small stocks; has little effect on the liquidity of low-priced or high-volatility stocks; and leads to greater increases in volatility in these stocks. Finally, during days when market making is difficult, AT provide less liquidity, improve efficiency more, and increase volatility more than on other days

  • Short Selling and the Price Discovery Process (with Ekkehart Boehmer)

We show that stock prices are more accurate along several dimensions when short sellers are more active. First, in a large panel of NYSE-listed stocks, high-frequency informational efficiency of prices improves with greater daily shorting flow. Second, at monthly and annual horizons, more shorting flow accelerates the incorporation of public information into prices. Third, greater shorting flow reduces post-earnings announcement drift for negative earnings surprises. Fourth, we demonstrate that short sellers change their trading around extreme return events in a way that aids price discovery and reduces divergence from fundamental values. These results are robust to various econometric methodologies and model specifications. Together with earlier evidence that short sellers tend to be informed traders, our results highlight the important role that their trading activity plays in the price discovery process.

  • Earnings Attributions and Information Transfers from Management Earnings Forecasts (with David Koo and Eric Yeung)

Management frequently attributes earnings news to various economic events. Using textual analysis, we identify the economic factors underlying earnings news based on the press releases that contain management earnings forecasts. We find that earnings news in management forecasts is attributed to a wide range of industry-wide shocks and firm-specific actions. We also find that earnings attributions significantly affect peer firms’ price reactions to the earnings news. Specifically, earnings news attributed to industry-wide trends or firm structural changes leads to positive information transfers but news attributed to firm competitive moves triggers negative information transfers.

  • Do equity short sellers anticipate bond rating downgrades? (with Tyler Henry and Darren Kisgen)

In the month preceding a credit rating downgrade, equity short interest is 40% higher than one year prior and short selling returns to normal levels following a downgrade. Short interest is higher for downgrades with higher negative equity announcement returns and for more severe downgrades (e.g., to speculative grade). Short selling also facilitates price discovery in equity markets around rating downgrades. Abnormal returns following downgrades are smaller when short selling is higher prior to the downgrade and when the costs of short selling are smaller. Short selling also increases before bond prices anticipate the downgrade.

  • High short interest effect and aggregate volatility risk (with Alexander Barinov)

We propose an alternative explanation of why high short interest stocks under-perform. We find that stocks with high relative short interest (RSI) beat the CAPM when expected aggregate volatility increases. The reason is that stocks with high RSI have high levels of firm-specific uncertainty and abundant real options. When aggregate volatility increases in recessions, firm-specific uncertainty also does. All else equal, the increase in uncertainty makes real options less sensitive to the value of the underlying asset and, therefore, less risky. Also, all else equal, higher uncertainty means higher value of real options. Consistent with this argument, we find that high RSI firms earn negative CAPM alphas only if these firms have high uncertainty or abundant real options. The two-factor ICAPM with the aggregate volatility risk factor explains the negative alphas of high RSI firms and the more negative alphas of high RSI firms with high levels of uncertainty or real options.

  • Order flow and prices (with Ekkehart Boehmer)

We provide new evidence on the relation between order flow and prices, an issue that is central to asset pricing and market microstructure. We examine proprietary data on a broad panel of NYSE-listed stocks that reveal daily order imbalances by institutions, individuals, and market makers. We can further differentiate regular institutional trades from institutional program trades. Our results indicate that order imbalances from different trader types play distinctly different roles in price formation. Institutions and individuals are contrarians with respect to previous-day returns, but differ in the effect their order imbalances have on contemporaneous returns. Institutional imbalances are positively related to contemporaneous returns, and we provide cross-sectional evidence that this relation is likely to be the result of firm-specific information institutions have. Individuals, specialists, and other market makers appear to provide liquidity to these actively trading institutions. Our results also suggest a special role for institutional program trades, which tend to be uninformed and provide liquidity to more aggressively trading institutions. Finally, institutional non-program imbalances (information which is not available to market participants) have predictive power for next-day returns.

  • Performance volatility and firm valuation (with Daniel Chi)

Theories predict both positive and negative effects of performance volatility on firm value, and the empirical evidence is mixed. We find a robust and economically significant positive relation between performance volatility and firm value. Interestingly, this positive relation is driven by the idiosyncratic component of performance volatility. The positive relation is more pronounced for firms with higher growth and higher uncertainty, but is diminished for firms facing higher financing constraints. The positive relation is also stronger when managerial incentives are more equity-based and encourage risk-taking, and when the management is less entrenched. Our findings reconcile the mixed predictions and evidence on the relation between performance volatility and firm value.

  • Short Arbitrage and Market Anomalies (with Andrew Zhang)

We contribute comprehensive evidence on short arbitrage of a broad range of well-known financial anomalies including accruals (ACC), asset growth (AG), net equity issues (NS), external financing (XFIN), financial distress (CHS), profitability (ROE), and earnings surprises (SUE). First, short sellers are more active on the short side of these anomalies where lower future returns are expected. Second, short arbitrage is less pronounced among firms with severe short sale constraints, which produces stronger market anomalies among these firms. Third, the abnormal negative returns to high short interest stocks and the negative short interest-return relation are significantly weakened, and even eliminated in some cases, when the anomaly variables are controlled for, suggesting that market anomalies are the primary driver for the return patterns associated with short interest.

PAPER PRESENTATIONS AT PROFESSIONAL MEETINGS

  • 2011
  • 3rd RMA/UNC Academic Forum for Securities Lending Research, New York
  • “Do equity short sellers anticipate bond rating downgrades?”
  • Southern Finance Association, Key West
  • “High short interest effect and aggregate volatility risk”
  • Financial Management Association, Denver
  • “Cash flow volatility and firm valuation” *
  • “How are shorts informed: evidence from market anomalies”
  • 2010
  • Singapore Management University Accounting Symposium, Singapore
  • “Industry news, firm news, and information transfer from management earnings forecasts”
  • 2009
  • 1st RMA/UNC Academic Forum for Securities Lending Research, New York
  • “Short selling and the informational efficiency of prices”
  • All Georgia Finance Conference, Atlanta
  • “Short selling and the informational efficiency of prices”
  • 2007
  • American Finance Association, Chicago
  • “Order flow and prices”
  • Financial Management Association Doctoral Consortium, Orlando
  • “Short selling and the informational efficiency of prices”
  • Q-Group Fall meeting, Scottsdale
  • “Order flow and prices”
  • 2006
  • Workshop on the Microstructure of Foreign Exchange and Equity Markets, Ottawa
  • “Order flow and prices”

TEACHING EXPERIENCE

  • University of Georgia
  • 2011, Mathematical Finance (PhD)
  • 2008-2011, Corporate Finance Theory (Undergrad)
  • Texas A&M University
  • 2007, Boot Camp for Incoming Finance PhD Students (PhD)
  • 2004, 2006, Managerial Finance I (Undergrad)
  • Xi’an Foreign Language University
  • 1997-1999, English courses

PROFESSIONAL ACTIVITIES

  • Ad Hoc Referee for

Journal of Finance

Review of Financial Studies

Journal of Empirical Finance

Journal of Corporate Finance

Financial Management

Financial Review

Pacific-Basin Finance Journal

Review of Financial Economic

International Journal of Managerial Finance

  • Discussant, National Bureau of Economic Research (NBER) Microstructure meeting, May 2008
  • Program Committee (Investment Track), Midwest Finance Association, 2008
  • External grant proposal reviewer for the Research Grants Council of Hong Kong, 2012

HONORS AND AWARDS

  • 2007, Post-Doctoral Research Associate Fellowship, Mays Business School, Texas A&M University
  • 2007 American Finance Association Travel Award
  • 2006, Dean’s Award for Outstanding Teaching by a Doctoral Student, Mays Business School, Texas A&M University
  • 2005, Dean’s Award for Outstanding Research by a Doctoral Student, Mays Business School, Texas A&M University