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XIA MENG Brandeis University International Business School 415 South Street, MS 032 Waltham, MA 02454 Phone: (617) 966-1648 Email: [email protected] Website: people.brandeis.edu/~xiameng/ AREAS OF INTERESTS Research Primary: Asset Pricing, Empirical Finance, Applied Econometrics, Foreign Exchange Secondary: Macroeconomics, Development Economics Teaching Statistics, Econometrics, Empirical Finance, Development Economics EDUCATION Ph.D., International Economics and Finance, International Business School at Brandeis University, 2012 Dissertation: “Three Essays on Empirical Finance” Expected Completion Date: May 2012 Committee Members: Blake LeBaron, Carol L. Osler, and Jens Hilscher B.S., Internatioanl Economics and Trade, Peking University, 2006 RESEARCH PAPERS “Rare Bubbles and Disasters and Tail Distribution of Daily Stock Returns” “Exchange Rates and Commodity Prices ---- An Analysis and Trading Strategy on G10 Currencies” (with Ritirupa Samanta) “Volatility of Stock Return Variance and Capital Gains Tax” (with Junbo L. Wang and Zhipeng Yan and Yan Zhao) TEACHING EXPERIENCE Brandeis University Instructor Econometrics (Undergraduate), Spring, Summer, and Fall 2010 Statistics for Economic Analysis (Undergraduate), Summer 2008, 2009 and Spring 2010 Teaching Assistant Advanced Econometrics I (Ph.D.) for Professor G. Michael Rife, Spring 2011 Financial Manias and Crises (Masters) for Professor Blake LeBaron, Spring 2010 Financial Forecasting (Masters) for Professor Blake LeBaron, Spring 2010 Advanced Econometrics II (Ph.D.) for Professor Hong Li, Fall 2009 Econometrics (Undergraduate) for Professor Linda Bui, Fall 2008 Topics in Sustainable Development (Masters) for Professor Ricardo Godoy, Spring 2008 Statistics for Economic Analysis for Professor Nidhiya Menon, Fall 2007 Survey Design and Data Analysis (Masters) for Professor Ricardo Godoy, Fall 2007 RESEARCH EXPERIENCE AND OTHER EMPLOYMENT Advanced Research Center, State Street Global Advisors , Boston, MA Quantitative Research Intern Designed a trading model of a G10 currency portfolio based on the co-integration relationship between currency prices and their customized commodity indexes using Error Correction Model, Summer and Fall 2010 Elaborated a fundamental model for G10 currency trading which considers several economic factors as signals to predict exchange rates, Summer 2009 and 2010 Explored the pros and cons of different productivity proxies for emerging market countries, which are used as a factor in dynamic strategic hedging on EM currencies, Summer 2009 Brandeis University Research Assistant For Professor Gary Jefferson, explored the impact of restructuring on the research institutes' productivity with dataset from Chinese research institutes, examined the reasons of change in energy intensity in Chinese firm's production process using the LME dataset provided by National Bureau of Statistics, Fall 2006, Spring, Summer and Fall 2007, Spring 2008 HONORS AND AWARDS Graduate student fellowship, Brandeis University, 2006-2010 NSF Travel Grant for the 3rd Lindau Meeting with Nobel Laureates in Economics, Summer 2008 Mary Kay Scholarship for Outstanding Study, Peking University, 2005 Outstanding Social Work Award, Peking University, 2004 PROFESSIONAL ORGANIZATIONS American Economic Association, 2011-present American Finance Association, 2011-present Financial Management Association International, 2011-present COMPUTER SKILLS AND QUALIFICATIONS Computer Programs and OS: Matlab, SAS, Stata, and Windows Databases: WRDS, CRSP, Compustat, Global Insight, Factset, and Bloomberg Passed all 3 levels of CFA exams upon the first attempts LANGUAGES Chinese (native), English (fluent), French(intermidate) REFERENCES Blake LeBaron (Committee Chair) Abram L. and Thelma Sachar Professor of International Economics International Business School (IBS) - MS 032 Brandeis University 415 South Street Waltham, MA 02454 Phone: 781-736-2258 Email: [email protected] Jens Hilscher Assistant Professor of Finance International Business School (IBS) - MS 032 Brandeis University 415 South Street Waltham, MA 02454 Phone: 781-736-2261 Email: [email protected] Carol L. Osler Associate Professor of Finance International Business School (IBS) - MS 032 Brandeis University 415 South Street Waltham, MA 02454 Phone: 781-736-4826 Email: [email protected] RESEARCH PAPER ABSTRACTS Rare Bubbles and Disasters and Tail Distribution of Daily Stock Returns (Job Market Paper) The existence of fat-tailed distributions underlying financial time series has been known for a long time. In this paper, I use OLS Hill estimator to measure the tail thickness of daily returns of US stock market. Based on bootstrap test, I show that 1) the return distribution is not symmetric in tails, with a significantly fatter right tail than the left; 2) the daily returns of US stock market exhibit significantly fatter tails during economic recession than during expansion. The fat tail features can be driven by rare events of bubbles and disasters, which refer to relatively large increase or decline in consumption with a very small probability. To demonstrate this argument, I develop a bubble-disaster model based on Rietz-Barro rare-disaster model which allows for: 1) Epstein-Zin preference of representative agent, 2) time-varying probability of bubble, 3) a probability of disaster after the bubble. I then calibrate the model at daily frequency and find that the model not only generates consumption series with plausible properties, but also equity returns with tail exponent comparable with that of real data. Furthermore, I examine how the tail behavior of equity return distribution is influenced by some key parameters in the model, such as the size, probability, and duration of bubble and disaster, the risk aversion, and the intertemporal elasticity of substitution. Exchange Rates and Commodity Prices ---- An Analysis and Trading Strategy on G10 Currencies, Joint paper with Ritirupa Samanta There is a dual relationship between commodity prices and exchange rates. On the one hand, commodity prices can be used to construct a proxy of a country’s terms of trade, which serves as a determinant of real exchange rates. On the other hand, as soon as an economy has enough market share in the world market of some commodities, the appreciation or depreciation of its currency will influence the world price of these commodities through the impact on supply and/or demand in their world market. Based on the structural model of the joint determination between commodity prices and real exchange rates, this paper empirically tests the cointegration relationship between nominal exchange rates of G10 currencies and their country-specific real commodity price indices. Further, we design a simple monthly trading strategy on G10 portfolio based on the errorcorrection framework. During the sample period from December 1996 to December 2009, the representative long/short portfolio realizes an annualized return of 16.5% after transaction costs, with an information ratio of 1.74 and a maximum drawdown of 8.3%. Volatility of Stock Return Variance and Capital Gains Tax, Joint paper with Junbo L. Wang, Zhipeng Yan, and Yan Zhao We examine how the violation of loan covenants (technical default) impacts firm dividend policy. Using contract-level private loan data for nonfinancial firms in the U.S., we find that the occurrence of a covenant violation significantly increases the likelihood of a dividend reduction in the subsequent quarter. This evidence suggests that creditors can influence firm policies even outside of bankruptcy. We also find that the degree of creditor-shareholder conflict significantly impacts this result: firms near financial distress and firms with weak corporate governance practices are more likely to experience dividend cuts after technical default. Finally, we find that the likelihood of dividend cuts upon technical default declined after the repeal of the GlassSteagall Act. This is consistent with less stringent monitoring from creditors due to the conflict of interest introduced by the repeal, which allowed both underwriting and commercial banking services within the same financial institution. Our findings suggest that loan covenants serve a critical role in mitigating creditor-shareholder conflicts but the repeal of Glass-Steagall has significantly diminished their efficacy.