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I am a PhD candidate in Economics at UCLA. I am on the job market and will be available for interviews at the 2020 ASSA meeting in San Diego.

My research fields are Information Economics, Market Microstructure, Asset Pricing.

Email: wangyilin@ucla.edu

CV

 

Research

Information Sharing Policy and Inter-dealer OTC Markets (Job Market Paper) [link]

Many decentralized over-the-counter (OTC) markets have recently become subject to new regulations requiring transparency. I build up an information model that features bilateral trade in double auction, endogenous public signal, and inter-dealer network formation to study the effect of TRACE on the inter-dealer markets. In the trading stage, I study the private information diffusion process and endogenize the public information contained in the disseminated trading price. I show that in markets with a relatively low degree of information asymmetry, post-trade transparency makes the adverse selection more severe and reduces the surplus from asset reallocation between dealers, and thus hurts the inter-dealer network formation. Investors are more likely to be symmetrically uninformed about thinly traded bonds. The empirical results provide evidence for that and show TRACE has a significant negative effect on the inter-dealer trading frequency for thinly traded bonds.

Corrigendum to Trading and Information Diffusion in Over-the-Counter Markets (Econometrica Revise and Resubmit) [link]

with Peter Kondor and Ana Babus

As it was noticed by Yilin Wang, in Babus and Kondor (2018) the first-order condition is not consistent with their description of the OTC game, due to the negligence of the indirect price effect. This work is a corrigendum to Babus and Kondor (2018).

Determinants of Currency Composition of Reserves: a Portfolio Theory Approach with an Application to RMB (IMF Working Paper) [link]

with Yinqiu Lu

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches - liquidity tranche and investment tranche - especially for those with adequate reserves. Incorporating reserve tranching, we have developed in this paper a central bank's reserve portfolio choice model to analyze the determinants of the currency composition of reserves. In particular, we adopt the classical mean-variance framework for the investment tranche and the asset-liability framework for the liquidity tranche. Building on these frameworks, the roles of currency compositions in imports invoicing and short-term external debt, and risk and returns of reserve currencies can be quantified by our structural model - a key contribution of our paper given the absence of structural models in the literature. Finally, we estimate the potential paths of the share of RMB in reserves under different scenarios to shed light on its status as an international currency.

Large Traders, Asset Markets, and Currency Crises [link]

with Kim-Sau Chung

During currency crises, large traders once simultaneously short the asset markets and currency market. We study the large trader's information manipulation in crises by introducing a large trader in an asset market and a currency-attack coordination game with imperfect information. The asset price realized in the asset market aggregates dispersed private information acting as a public signal in the currency-attack game. We show that the incentive of the large trader to manipulate the asset price in favor of its currency attack leads to financial contagion. In equilibrium, the large trader's manipulating the asset price to be lower and attacking the currency regime are concurrent; the large trader's manipulation in the asset market is most significant when the public signal is in the intermediate range. To draw policy implication regarding the market transparency, we show that when the asset market is transparent, a natural equilibrium refinement that incorporates forward induction reasoning would select the equilibrium where every trader behaves most aggressively in the currency-attack game and the currency regime is most fragile.