The Ninth Summer Institute of Finance (SIF), hosted by the Shanghai Advanced Institute of Finance (SAIF) at Shanghai Jiao Tong University, successfully concluded on July 17, 2018. Over the course of one and a half days, more than 60 leading academics, researchers, and finance professionals from top institutions worldwide gathered in Shanghai to explore critical themes shaping the future of finance—Chinese financial markets and institutions and fintech innovation.
Co-chaired by Professor Yan Hong, Deputy Dean of SAIF and Deputy Director of the China Institute of Finance, and Professor Ju Nengjiu, the conference brought together global thought leaders in finance. Professor He Zhiguo of the University of Chicago Booth School of Business served as Chair of the Paper Review Committee. Distinguished participants included Professor Wang Jiang, Chair of SAIF’s Academic Committee and Professor at MIT Sloan; Professor Zhang Chun, Executive Dean of SAIF; and numerous other faculty and visiting professors.
With 121 submissions received from around the world, the peer-reviewed conference selected 12 high-impact papers for presentation across five thematic sessions:
- Leverage in China’s Stock Market
- Virtual Currencies
- P2P Lending in China and the U.S.
- Credit Guarantees in China
- Behavioral Finance in the Chinese Context
These sessions featured presentations and expert commentary from scholars representing institutions such as MIT, Columbia University, the University of Toronto, Hong Kong University of Science and Technology, Tsinghua University PBC School of Finance, and Nanyang Technological University.
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Leverage in China’s Stock Market: Understanding Risk and Regulation
In the session on "Leverage in China’s Stock Market," chaired by Professor He Zhiguo, two pivotal studies were presented.
Professor Harrison Hong from Columbia University examined the dual impact of credit supply on asset prices—direct effects and expectations-driven effects. His research shows that when bank lending loosens, financially constrained investors take on excessive risk (direct effect), while unconstrained investors anticipate rising markets and buy early (expectation effect). The findings suggest that macroprudential policies can mitigate direct risks but must be reevaluated to address speculative expectations.
Professor Bian Jiangze from the University of International Business and Economics noted that these dynamics extend beyond formal markets into shadow banking, offering insights into China’s 2015 market volatility.
Meanwhile, Assistant Professor Song Zhongzhi from Cheung Kong Graduate School of Business explored self-initiated stock suspensions during market crashes. His analysis of the 2015 crash revealed that declining market-wide returns were a primary driver for companies halting trading. These suspensions significantly altered investor behavior and profitability across different groups.
Commentator Professor Chen Hui from MIT Sloan highlighted the importance of understanding corporate incentives behind short-term price protection, suggesting deeper inquiry into liquidity risks and firm-level decision-making under stress.
Virtual Currencies: Market Structure and Information Dynamics
The virtual currency session delved into market inefficiencies, data value, and collective decision-making.
Professor Alfred Lehar from the University of Calgary presented “Bitcoin Microstructure and the Kimchi Premium,” explaining why Bitcoin trades at a premium in South Korea. He attributed this to capital controls and structural frictions in trading platforms. Greater financial openness correlates with lower premiums—a pattern applicable across digital currencies.
Assistant Professor Li Jiasun from George Mason University praised the timeliness of the study but urged deeper exploration of demand-side drivers and microstructure channels.
Assistant Professor Yizhou Xiao from CUHK introduced “Up-Cascaded Wisdom of the Crowd,” applying an All-or-Nothing (AoN) rule to information cascades in crowdfunding and IPOs. Her model demonstrates that AoN mechanisms can prevent negative herding, improve funding efficiency, and guide markets toward optimal allocation.
Professor Liu Tingjun from HKU commended the novel framework and engaged in detailed discussion on its assumptions.
Professor Yang Liyan from SAIF (also at Rotman School, U of Toronto) presented “The Economics of Data,” proposing a traceable model to assess data's economic value. He found that when firms hoard consumer data, it leads to inefficiency and even prisoner’s dilemma scenarios. However, independent data vendors or strategic data-sharing alliances could restore efficiency and boost overall surplus.
Assistant Professor John Nash from HKUST encouraged broader applications and transaction-level analysis to strengthen practical relevance.
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P2P Lending in China and the U.S.: Complement or Competitor?
This session compared marketplace lending ecosystems across borders.
PhD candidate Tang Huan from HEC Paris questioned whether P2P platforms substitute or complement traditional banks. Her findings indicate that while P2P lending serves niche segments with small loans, it does not displace banks but rather supplements them—especially for underserved borrowers.
Assistant Professor Ru Hong from NTU emphasized this complementary role and suggested further research into borrower screening methods and platform-bank differentiation.
Doctoral student Zhu Haikun from Tilburg University investigated whether technology undermines macroprudential regulation through P2P lending. His evidence shows that P2P channels enable households to bypass loan-to-value (LTV) caps, increasing household leverage.
Professor Yang Baozhong from Georgia State University recommended propensity-score matching to strengthen causal inference.
Professor Sudheer Chava from Georgia Tech analyzed borrower outcomes on U.S. marketplace lending (MPL) platforms. His study reveals that borrowers often use MPL funds to pay off high-interest credit card debt, improving their credit scores and access to bank credit. However, if banks begin using MPL data in scoring models, some borrowers may face adverse consequences due to over-indebtedness signals.
Professor Yu Fan from Claremont McKenna praised the work but urged attention to endogeneity issues between lending decisions and observed outcomes.
Credit Guarantees in China: Hidden Risks and Real Effects
Professor Yan Hong chaired this session on credit guarantees—a cornerstone of China’s corporate financing landscape.
Assistant Professor Zhang Zilong from City University of Hong Kong presented groundbreaking experimental evidence on implicit government guarantees. His study finds that at least 1.75% of bond value reflects perceived state backing—even outside SOEs or overcapacity sectors. These guarantees influence real corporate decisions: reduced implicit support leads SOEs to cut investment, issue less debt, and hoard cash.
Assistant Professor Chen Zhuo from Tsinghua PBCSF provided constructive feedback on methodology and implications.
Associate Professor Zhang Xiaoqian from Zhejiang University analyzed risk contagion along loan guarantee chains using court enforcement data. Her research uncovers systemic risk spreading from individuals to large conglomerates—undermining banks’ original intent to mitigate default risk through guarantees.
Assistant Professor Shan Chenyu from Shanghai University of Finance and Economics suggested examining whether defaults were anticipated by guarantors. Co-author Professor Liu Xiaolei from Peking University Guanghua School joined the discussion.
Behavioral Finance in China: Psychology Meets Investment
The final session bridged behavioral theory with real-world investor behavior.
Professor Zhu Ning (SAIF & Tsinghua PBCSF) presented “Real Life Experience and Financial Risk Taking,” using traffic accidents as a natural experiment. Results show that individuals who experience near-miss accidents significantly reduce their financial risk-taking—providing causal evidence for personal experience influencing investment choices.
Professor Han Bing (Rotman & SAIF) suggested expanding the sample to isolate specific psychological channels.
Professor Hongjun Yan from DePaul University introduced “Investment under Fast-Thinking,” the first study on System 1 thinking in financial markets. Using Renrendai data, he showed that investors rely on simple heuristics—like focusing on interest rates over credit ratings—and depend more on these rules under time pressure.
Assistant Professor Lu Xiaomeng from SAIF outlined contributions to behavioral finance, questioning benchmarks for rationality and calling for more real-world experimental designs.
About the Summer Institute of Finance (SIF)
The annual SIF conference has become a premier academic forum for scholars focused on emerging markets, particularly China. By fostering rigorous debate and cross-border collaboration, SIF supports young researchers in refining their work with input from global experts. Attendance ranges from 30 to 60 scholars each year, reflecting its selective yet growing influence among Chinese-speaking finance academics worldwide.
Frequently Asked Questions (FAQ)
Q: What is the main focus of the Summer Institute of Finance?
A: The SIF focuses on cutting-edge research in Chinese financial markets, institutions, and fintech innovations, promoting global academic exchange.
Q: Who typically attends the SIF conference?
A: Leading academics, PhD candidates, and finance professionals from top universities and research institutions around the world participate annually.
Q: How are papers selected for presentation at SIF?
A: Submissions undergo rigorous peer review by an international committee; only a small fraction are accepted based on originality, methodology, and relevance.
Q: Why is behavioral finance gaining attention in China?
A: As retail investor participation grows, understanding psychological biases helps explain market anomalies and improve investor education policies.
Q: Can fintech platforms challenge traditional banking regulation?
A: Yes—research presented shows P2P lending can bypass macroprudential tools like LTV ratios, highlighting regulatory gaps in digital finance.
Q: Is data sharing beneficial for financial efficiency?
A: Strategic data sharing or third-party data markets can enhance efficiency, though unchecked hoarding creates suboptimal outcomes for firms and consumers.
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