Research

Working Papers

AI (ChatGPT) Democratization and Trading Inequality  (with Xi Dong, Xiumin Martin, and Changyun Zhou)

Revise and Resubmit, Journal of Accounting Research

Award/Media: China Journal of Accounting Research (CJAR) Summer Workshop 2025 Best Paper Award

Presented at: JAR Conference 2025, Melbourne Asset Pricing Meeting at University of Melbourne (scheduled), Journal of Accounting, Auditing and Finance (JAAF) Symposium 2025 (scheduled), 2025 Dr. Richard A. Crowell Memorial Prize Paper Competition (scheduled), AI in Finance Conference 2025 at University of Maryland, AAA Annual Meeting 2025, CICF 2025, CJAR Summer Workshop 2025, CUHK(SZ) Forum of Asian Accounting Scholars 2025, FARS 2025, MFA 2025, NTU Conference on AI for Finance 2025, 16th Annual Hedge Fund Research Conference 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, Washington University in Saint Louis

Abstract: We present the first analysis of the influence of democratized AI (ChatGPT) on investors’ trading activities. We develop an AI-sentiment measure using earnings conference calls. We find that before the introduction of ChatGPT, short-selling activities exhibited alignment with AI-sentiment, whereas retail trading did not. However, following the wide deployment of ChatGPT, we observed a significant increase in the AI alignment of retail traders, accompanied by a decrease in the alignment of short sellers, implying that AI contributes to reducing the trading inequality between retail investors and short sellers. We further find that the primary mechanism driving the AI democratization effect on retail trading is its ability to lower information processing costs for retail investors. Lastly, AI-sentiment positively predicts returns both before and after the democratization of AI in a similar way, with no subsequent return reversal observed in the long run. This evidence suggests that AI-sentiment effectively captures fundamental information, and the increased alignment of retail investors' trading with AI-sentiment does not appear to have a measurable impact on price efficiency. To strengthen our causal inferences, we examined the impact of exogenous ChatGPT outages. These outages significantly reduced the alignment between retail and AI-sentiment, thus reinforcing our conclusions.

Board Skill Diversity and Firm Risk

Based on my second-year summer paper

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 and Liana Li)

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