Research

Working Papers

AI Democratization and Trading Inequality, with Xi Dong (Baruch College), Xiumin Martin (Washington University in Saint Louis), and Changyun Zhou (SWUFE)

Revise and Resubmit, Journal of Accounting Research

Award/Media: Dr. Richard A. Crowell Memorial Prize Paper Competition Finalist, China Journal of Accounting Research (CJAR) Summer Workshop 2025 Best Paper Award

Presented at: JAR Conference 2025, 2025 Dr. Richard A. Crowell Memorial Prize Paper Competition, Global AI Finance Research Conference 2025 (scheduled), CICF 2025, FARS 2025, MFA 2025, CJAR Summer Workshop 2025, AI in Finance Conference 2025 at University of Maryland, Melbourne Asset Pricing Meeting at University of Melbourne, CUHK(SZ) Forum of Asian Accounting Scholars 2025, NTU Conference on AI for Finance 2025, 16th Annual Hedge Fund Research Conference 2025, Journal of Accounting, Auditing and Finance (JAAF) Symposium 2025, AAA Annual Meeting 2025, CFEA 2024, 1st Workshop on LLMs and Generative AI for Finance, “AI Era in Finance” Symposium​ 2024, Australian National University, Baruch College, McGill University, Monash University, Peking University, Renmin University of China, Southwestern University of Finance and Economics, Tsinghua University, University of Hong Kong, Washington University in Saint Louis

Abstract: We present the first analysis of how Generative AI (GenAI) shapes investors' trading activities. Using an AI-sentiment measure extracted from earnings-call transcripts to proxy for textual signals, we find notable shifts in trading behaviors around earnings calls. Before the wide deployment of ChatGPT, short selling was aligned with AI-sentiment, whereas retail trading was not. However, following ChatGPT's deployment, the alignment of retail traders with AI-sentiment significantly increases, while the alignment of short sellers weakens, albeit insignificantly. Stocks with higher information processing costs exhibit a more pronounced increase in retail trading alignment, scenarios where retail investors are likely to benefit more from AI. Further evidence shows that information asymmetry declines, and retail investors' trading profitability improves, whereas short sale profitability declines in stocks for which retail investors are more likely to trade based on AI signals. Retail investors also exhibit a modest increase in their trading intensity in these stocks, indicating greater participation. Exogenous outages reduce the alignment between retail trading and AI-sentiment, reinforcing our inferences. Collectively, this study suggests that AI is a promising technology for narrowing the information gap in trading on complex textual financial disclosures between investor classes with clear disparities in abilities to process public disclosures.

Board Skill Diversity and Firm Risk

Presented at: Hawaii Accounting Research Conference (HARC) 2024, AAA Annual Meeting 2023, AAA Spark Meeting 2023, Financial Markets and Corporate Governance Conference 2023, Baruch-SWUFE Conference 2023, AAA Joint Meeting of Diversity and TLC 2022, Baruch College

Abstract: This study examines whether board skill diversity is associated with firm risk. Using skill-related keywords in director biographies disclosed in firms’ proxy statements as measures of skill diversity, I find that board skill diversity reduces firms’ idiosyncratic risk. Specifically, board skill diversity reduces idiosyncratic risk by monitoring CEO power and advising on investment policy. I next show that it is skill diversity, rather than simply the number of skills, that mainly reduces firm risk, and the depth of each director’s skills also contributes to the risk reduction. In addition, the association between board skill diversity and firm risk is mitigated when directors hold multiple outside board seats, but strengthened when firms face less product market threat and when firms have greater risk-taking. I further find that board skill diversity lowers firm risk at the cost of firm value and growth opportunities but still increases R&D investment. This finding suggests the cost-benefit trade-off of board skill diversity. I last show that having more female directors, measured by the exogenous Nasdaq’s diversity rule, increases board skill diversity. Overall, this study identifies an important yet unrecognized board diversity dimension—director skills and qualifications at the acquired level and provides the first findings on how the role of board skill diversity shapes firms’ risk environment.

Work In Progress

Riding the Market on Sound Waves, with Xi Dong (Baruch College) and Liana Li (Baruch College)

Presented at: 37th Annual WashU Accounting Conference Poster Session

One Ring to Rule Them All: Can Generative AI Predict the Moves of All Market Participants? with Xi Dong (Baruch College)

Does the Media Improve or Hurt Market Efficiency? Evidence from Earnings Announcements, Momentum and 130 Other Anomalies, with Xi Dong (Baruch College), Joel Peress (INSEAD), and Changyun Zhou (SWUFE)

Can AI Predict Returns? Evidence from a Comprehensive Analysis of News Sources, with Xi Dong (Baruch College)