Charles Cao

Smeal Chair Professor in Finance
Department: Finance
Office: 338 Business Building
Phone: 814-865-7891
Fax:
E-mail: qxc2@psu.edu
Member of Faculty Since: 1993


Introduction

Charles Cao is The Smeal Chair Professor of Finance at the Department of Finance, the Smeal College of Business at the Pennsylvania State University. He received his Ph.D. in Finance from the University of Chicago's Graduate School of Business in 1993, M.S. from the University of Kentucky in 1988, and B.S. from Peking University in 1984.

 

Professor Cao won competitive research grants from Morgan Stanley (2004), Federal Deposit Insurance Corporation-FDIC (2006-2007), the BNP Paribas Hedge Fund Center at SMU (2009) and the Q-group (2010).  He was also selected Fellow of FDIC Center for Financial Research in 2006.  He serves as an editor of Pacific-Basin Finance Journal, an associate editor of Journal of Financial Markets, Review of Derivatives Research, Review of Quantitative Finance and Accounting, and Annals of Economics and Finance.  He has taught M.B.A. and Ph.D. courses at the Smeal College of Business, Penn State University. 


Current Research

Professor Cao's research interests include derivative securities markets, market microstructure, credit risk, mutual funds and hedge funds. His research has been published in a wide range of academic journals, including Journal of Finance, Review of Financial Studies, Journal of Business, Journal of Financial and Quantitative Analysis, Journal of Financial Markets, Journal of Econometrics and Journal of Financial Intermediation. His paper ``Price Discovery without Trading: Evidence from Nasdaq Pre-opening'' (co-authored with Eric Ghysels and Frank Hatheway) received the New York Stock Exchange Award for Best Paper on Equity Trading at Western Finance Association Meetings in 1999.

 Last Updated: 4/5/2012


Expertise

Derivative Securities
Market Microstructure
Hedge Funds and Mutual Funds
Credit Risk


Publication List

1. Charles Cao, Yong Chen, Bing Liang and Andrew Lo, "Can Hedge Funds Time Market Liquidity?, ", Journal of Financial Economics, 2012, forthcoming, pp. 1-58.

2. Charles Cao, Tim Simin and Ying Wang, "Do Mutual Fund Managers Time Market Liquidity?", Journal of Financial Markets, 2012, forthcoming, pp. 1-50.

3. Charles Cao, Eric Ghysels and Frank Hatheway, "Derivatives do Affect Mutual Fund Returns: Evidence from the Financial Crisis of 1998", Journal of Futures Markets, 2011, 31, pp629-658..

4. Charles Cao, Fan Yu and Ken Zhong, "Pricing Credit Default Swaps with Option-Implied Volatility", Financial Analyst Journal, 2011, 67, pp 67-76.

5. Charles Cao, Fan Yu and Ken Zhong, "The Information Content of Option-Implied Volatility for Credit Default Swap Valuation", Journal of Financial Markets, 2010, 13, pp. 321-343.

6. Charles Cao, Tim Simin and Jing Zhao, "Can Growth Options Explain the Trend in Idiosyncratic Risk?", Review of Financial Studies, 2008, 21, pp 2599-2633.

7. Charles Cao, Eric Chang and Ying Wang, "An Empirical Analysis of the Dynamic Relationship between Mutual Fund Flow and Market Return Volatility", Journal of Banking and Finance, 2008, 32, pp. 2111-2123.

8. Charles Cao, Oliver Hansch and Xiaoxin Wang, " The Information Content of an Open Limit Order Book", Journal of Futures Markets , 2008, 29, pp. 16-41.

9. Charles Cao, Oliver Hansch and Xiaoxin Wang, "Order Placement Strategies in a Pure Limit Order Book Market", Journal of Financial Research, 2008, 31, pp. 113-140.

10. Charles CAo and Jay Huang, "Determinants of S&P 500 Index Option Returns", Review of Derivatives Research, 2008, 10, pp 1-38.

11. Charles Cao, Zhiwu Chen and John Griffin, "Informational Content of Option Volume Prior to Takeovers", Journal of Business, 2005, 78, pp 1073-1109.

12. Charles Cao, Haitiao i and Fan Yu, "Is Investor Misreaction Economically Significant? Evidence from Short- and Long-term Index Options", Journal of Futures Markets, 2005, 25, pp 717-752.

13. Charles Cao, Laura Field and Gordon Hanka, "Does Insider Trading Impair Market Liquidity: Evidence From IPO Lockup Expirations", Journal of Financial and Quantitative Analysis, 2004, 39, pp 25-46.

14. Heejoon Ahn, Charles Cao and Hyuk Choe, "Share Repurchase Tender Offers and Bid-Ask Spreads", Journal of Banking and Finance, 2001, 25, pp 445-478.

15. Charles Cao, Eric Ghysels and Frank Hatheway, "Price Discovery without Trading: Evidence from Nasdaq Pre-opening", Journal of Finance, 2000, 56, pp 1339-1365.

16. Gurdip Bakshi, Charles Cao and Zhiwu Chen, "Do Call Prices and the Underlying Stock Always Move in the Same Direction?", Review of Financial Studies, 2000, 13, pp 549-584.

17. Gurdip Bakshi, Charles Cao and Zhiwu Chen, "Pricing and Hedging Long-Term Options", Journal of Econometrics, 2000, 94, pp 277-318.

18. Gurdip Bakshi, Charles Cao and Zhiwu Chen, "Empirical Performance of Alternative Option Pricing Models", Journal of Finance, 1997, 52, 2003-2049.

19. Charles Cao, Hyuk Choe and Frank Hatheway, "Does the Specialist Matter? Differential Execution Costs and Inter-Security Subsidization on the NYSE", Journal of Finance, 1997, 52, pp 1615-1640.

20. Heejoon Ahn, Charles Cao and Hyuk Choe, "Decimalization and Competition Among Exchanges: Evidence from the Toronto Stock Exchange Cross-listed Securities", Journal of Financial Markets, 1998, 1, pp 51-87.

21. Heejoon Ahn, Charles Cao and Hyuk Choe, "Tick Size, Spread and Volume", Journal of Financial Intermediation, 1996, 5, pp 2-22.

22. Charles Cao and Ruey Tsay, "Nonlinear Time Series Analysis of Stock Return Volatility", Journal of Applied Econometrics , 1992, 7, pp 165-185.

23. Charles Cao and Daniel Nelson, "Inequality Constraints in the Univariate GARCH Model", Journal of Business & Economic Statistics, 1992, 10, pp 229-235.


Editorship

Editor, Pacific-Basin Finance Journal, 2009-Present

Associate Editor, Journal of Financial Markets, 2000-Present

Associate Editor, Review of Derivatives Research, 2007-Present

Associate Editor, Review of Quantitative Finance and Accounting, 2006-Present

Editorial Board Member, Review of Futures Markets, 2009-Present


Education

Ph.D. , Finance, University of Chicago,  1993 

M.S., Statistics, University of Kentucky,  1988 

B.S., Mathematics, Peking University,  1984 


Courses

Fin. 585, Financial Innovation in Portfolio/Risk Management (MBA)

Fin. 561, Theory of Financial Decisions (Ph.D.)

Fin. 410, Derivative Securities (Undergraduate)

Fin. 571, Advanced Topics on Derivative Securities (Ph.D.)

Fin. 406, Investments (Undergraduate)