Zhenyu Wang is Professor of Business Finance and Edward E. Edwards Professor at the Kelley School of Business in Indiana University. He was formerly a vice president at the Federal Reserve Bank of New York, where he was the head of Financial Intermediation Function. During the recent financial crisis, he contributed directly to the design of Fed emergency liquidity facilities, the reform of Fed discount window collateral management, the bailout of Bear Stearns and AIG, the security design of TARP, and the development of new capital requirements for banks. Before working at the NY Fed, he was a faculty member at Graduate School of Business in Columbia University for nine years and at the School of Business in UT Austin for one year. He has published research on equity, fixed income, derivative securities, asset management, and financial econometrics. Some of his publications are influential in business education and bank regulation. One of his papers was awarded the Best Paper on Investments at the Western Finance Association. Professor Wang obtained his Ph.D. degree in economics from the University of Minnesota, where he received the Alfred P. Sloan Doctoral Dissertation Fellowship.
PhD, Economics, University of Minnesota at Twin Cities, 1995
MA, Economics, University of Minnesota at Twin Cities, 1993
MS, Mathematics, Dalian Institute of Technology, China, 1985
BS, Mathematics, Dalian Institute of Technology, China, 1982
Professional Experience
Edward E. Edwards Professor, May 2015 - present
Kelley School of Business, Indiana University, Professor of Business Finance, with tenure, July 2012 - present
Federal Reserve Bank of New York, Head of Financial Intermediation Function, January 2009 - June 2012
Federal Reserve Bank of New York, Vice President, June 2005 - June 2012
McCombs School of Business, University of Texas at Austin, Associate Professor of Finance, with tenure, July 2004 - May 2005
Graduate School of Business, Columbia University, Associate Professor of Finance, July 1998 - June 2004
Graduate School of Business, Columbia University, Assistant Professor of Finance, July 1995 - June 1998
Selected Publications
McAndrews, J., Sarkar, A. and Wang, Z. (2017). The Effect of the Term Auction Facility on the London Interbank Offered Rate. Journal of Banking and Finance, 83, 135-152.
Abstract
The Term Auction Facility (TAF), the first auction-based liquidity initiative by the Federal Reserve during the 2007-2009 financial crisis, was aimed at improving conditions in the dollar money market and bringing down the significantly elevated London interbank offered rate (Libor). The effectiveness of this innovative policy tool is crucial for understanding the role of the central bank in financial stability, but academic studies disagree on the empirical evidence of the TAF effect on Libor. This paper shows that the disagreement arises from mis-specifications of econometric models. Regressions using the daily level of the Libor-OIS spread as the dependent variable miss either the permanent or temporary TAF effect, depending on whether the dummy variable indicates the events of the TAF or the regimes before and after the TAF. Those regressions also suffer from the unit-root problem and produce unreliable test statistics. By contrast, regressions using the daily change in the Libor-OIS spread are robust to the persistence of the TAF effect and the unit-root problem, consistently producing reliable evidence that the TAF was associated with downward shifts of the Libor-OIS spread. The evidence indicates the efficacy of the TAF in helping the interbank market to relieve liquidity strains.
Sundaresan, S. M., and Wang, Z. (2015). On the Design of Contingent Capital with a Market Trigger. Journal of Finance, 70(2), 881-920.
Abstract
Contingent capital (CC), which intends to internalize the costs of too-big-to-fail in the capital structure of large banks, has been under intense debate by policy makers and academics. We show that CC with a market trigger, in which direct stake-holders are unable to choose optimal conversion policies, does not lead to a unique competitive equilibrium, unless value transfer at conversion is not expected ex-ante. The "no value transfer'' restriction precludes penalizing bank managers for taking excessive risk. Multiplicity or absence of an equilibrium introduces the potential for price uncertainty, market manipulation, inefficient capital allocation, and frequent conversion errors. These results point to the need to explore alternative designs of a prudential capital structure for banks.
Wang, Z., and Zhang, X. (2012). Empirical Evaluation of Asset Pricing Models: Arbitrage and Pricing Errors in Contingent Claims. Journal of Empirical Finance, 19(1), 65–78.
Glasserman, P., and Wang, Z. (2011). Valuing the Treasury's Capital Assistance Program. Management Science, 57(7), 1195-1211.
Guasoni, P., Huberman, G., and Wang, Z. (2011). Performance Maximization of Actively Managed Funds. Journal of Financial Economics, 101(3), 574-595.
Sundaresan, S., and Wang, Z. (2009). Y2K Options and the Liquidity Premium in Treasury Markets. Review of Financial Studies, 22(3), 1021 - 1056.
Wang, Z. (2005). A Shrinkage Approach to Model Uncertainty and Asset Allocation. Review of Financial Studies, 18(2), 673-705.
Jagannathan, R., and Wang, Z. (2002). Empirical Evaluation of Asset Pricing Models: A Comparison of the SDF and Beta Methods. Journal of Finance, 57(5), 2337-2367.
Jagannathan, R., and Wang, Z. (1998). An Asymptotic Theory for Estimating Beta-Pricing Models Using Cross-Sectional Regression. Journal of Finance, 53(4), 1285-1309.
Wang, Z. (1998). Efficiency Loss and Constraints on Portfolio Holdings. Journal of Financial Economics, 48(3), 359-375.
Jagannathan, R., and Wang, Z. (1996). The Conditional CAPM and the Cross-Section of Expected Returns. Journal of Finance, 51(1), 3-53.
Edited on December 9, 2019
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You are now leaving the Kelley School of Business' official website; the views and opinions expressed in the linked website are those of the author and do not reflect the views, opinions, or official policy or position of Indiana University or the Kelley School of Business.