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Mutual Fund Investments in Retail Banking: Do Low Interest Rates Matter?

Office of Alumni and External Relations    2021-04-28

Mutual Fund Investments in Retail Banking: Do Low Interest Rates Matter?

Guest: Guodong Chen, Assistant Professor, New York University Shanghai

Host: Xu Wenjian, Assistant Professor, Antai

Time: Wednesday, Apr 28th, 2021,  10:00-11:30

Venue: A303, Antai

Abstract:

Using observational data from a retail banking in China, we show that individual investors have a greater incentive for risk taking in their mutual fund investments when interest rates are low. In particular, such reaching-for-yield incentives are limited, mainly concentrating in funds with medium levels of risk instead of those with high risks. This behavior is consistent with a psychological explanation of reference dependence. In addition, we further find that easier access to products instructions and portfolios, due to technological developments, strengthens such risk-taking incentives. Finally, we explore exogenous low interest rate shocks to achieve identification.  

Bio:

Guodong Chen is an Assistant Professor of Finance at New York University Shanghai and a Global Network Assistant Professor at New York University. Prior to joining NYU Shanghai, he obtained his PhD in Economics at University of Michigan, an MA degree in Economics from Peking University and a BS degree in Chemistry at University of Science and Technology of China. His major research interests include Consumer Finance and Household Finance, Banking and Financial Intermediation, Behavioral Finance as well as FinTech.

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