Charles Cao

Color portrait of Quanwei Cao

Professor of Finance, Smeal Chair Professor of Finance

Office Address 338 Business Building
Phone Number 814-865-7891
Email Address qxc2@psu.edu

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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.

Expertise

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.



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.

Education

Ph D, Finance, University of Chicago, 1993

MS, Statistics, University of Kentucky, 1988

BS, Mathematics, Peking University, 1984

Courses Taught

FIN 585 – Financial Innovation and Portfolio Risk Management (2)
Introduction to fundamental derivatives, standard valuation models, and practical applications to portfolio management; recognition, measurement, and management of portfolio risk.

FIN 410 – Derivative Markets (3)
Functions, techniques, and impact of speculation conducted through forward markets; the nature of speculative transactions, pricing, and methods of trading.

FIN 597A – Asset Pricing Theory (variable)
Special topics course.

FIN 601 – PH.D. DISSERTATION FULL-TIME
NO DESCRIPTION.

FIN 596 (Variable)
Creative projects, including nonthesis research, which are supervised on an individual basis and which fall outside the scope of formal courses.

Selected Publications

Cao C., Gustafson M., Velthuis R., "Index Membership and Small Firm Financing." Management Science, 2018.
Cao C., Goetzmann W., Liang B., Chen Y., "The Role of Hedge Funds in the Stock Price Formation Process." Financial Analyst Journal, 2018.
Cao C., Simin T., Gempesaw D., "The Decline of Informed Trading in the Equity and Options Markets." Journal of Alternative Investments, 2018, Invited.
Cao Q., "Real Estate Risk and Hedge Fund Returns (with Brent Ambrose and Walter D’Lima), Journal of Real Estate, Finance and Economics, 52, 197-225." 2016.
Cao Q., "Return Smoothing, Liquidity Costs, and Investor Flows: Evidence from a Separate Account Platform (with Grant Farnsworth, Bing Liang and Andrew Lo), Management Science, p1-18,." 2016.
Cao Q., "What Is the Nature of Hedge Fund Manager Skills? Evidence from the Risk Arbitrage Strategy (with Bradley Goldie, Bing Liang and Lubomir Petrasek), Journal of Financial and Quantitative Analys." 2016.
Cao Q., "Option Pricing and Hedging Performance under Stochastic Volatility and Stochastic Interest Rates (with Gurdip Bakshi and Zhiwu Chen)." 2014.
Cao Q., "Liquidity Risk and Institutional Ownership (with Lubomir Petrasek), Journal of Financial Markets, 21, 76-97." 2014.
Cao Q., "Liquidity Risk in Stock Returns: An Event-study Perspective (with Lubomir Petrasek), Journal of Banking and Finance 45, 72-83." 2014.
Cao Q., "Can Hedge Funds Time Market Liquidity? (with Yong Chen, Bing Liang and Andrew Lo), Journal of Financial Economics 109, 2013, 493-516." 2013.
Cao Q., "Do Mutual Fund Managers Time Market Liquidity?, (with Tim Simin and Ying Wang), Journal of Financial Markets 16, 279-307." 2013.
Cao Q., "Derivatives do Affect Mutual Fund Returns: Evidence from the Financial Crisis of 1998, (with Eric Ghysels and Frank Hatheway), Journal of Futures Markets, 31, 629-658." 2011.
Cao Q., "Pricing Credit Default Swaps with Option-Implied Volatility, (with Fan Yu and Ken Zhong), Financial Analyst Journal 67, 2011, 67-76." 2011.
Cao Q., "Option Pricing and Hedging Performance under Stochastic Volatility and Stochastic Interest Rates (with Gurdip Bakshi and Zhiwu Chen)." 2010.
Cao Q., "The Information Content of Option-Implied Volatility for Credit Default Swap Valuation, (with Fan Yu and Ken Zhong), Journal of Financial Markets 13, 321-343." 2010.
Cao Q., "An Empirical Analysis of the Dynamic Relationship between Mutual Fund Flow and Market Return Volatility, (with Eric Chang and Ying Wang), Journal of Banking and Finance 32, 2111-2123." 2008.
Cao Q., "Can Growth Options Explain the Trend in Idiosyncratic Risk? (with Tim Simin and Jing Zhao), Review of Financial Studies 21, 2599-2633." 2008.
Cao Q., "Determinants of S&P 500 Index Option Returns, (with Jingzhi Huang), Review of Derivatives Research, 10, 1-38." 2008.
Cao Q., "Order Placement Strategies in a Pure Limit Order Book Market, (with Oliver Hansch and Xiaoxin Wang), Journal of Financial Research, Vol. XXXI, 113-140." 2008.
Cao Q., "The Information Content of an Open Limit Order Book, (with Oliver Hanscah and Xiaoxin Wang), Journal of Futures Markets 29, 16-41." 2008.
Cao Q., "Informational Content of Option Volume Prior to Takeovers, (with Zhiwu Chen and John Griffin), Journal of Business, 78, 1073-1109." 2005.
Cao Q., "Is Investor Misreaction Economically Significant? Evidence from Short- and Long-term Index Options, (with Haitiao Li and Fan Yu), Journal of Futures Markets, 25, 717-752." 2005.
Cao Q., "Liquidity Consequences of IPO Lockup Expirations (with Laura Field and Gordon Hanka)." 2004.
Cao Q., "Does Insider Trading Impair Market Liquidity: Evidence from IPO Lockup Expirations, (with Laura Field and Gordon Hanka), Journal of Financial and Quantitative Analysis 39, 25-46." 2004.
Cao Q., "Share Repurchase Tender Offers and Bid-Ask Spreads (with Heejoon Ahn and Hyuk Choe), Journal of Banking and Finance 25, 445-478." 2001.
Cao Q., "Empirical Performance of Alternative Option Pricing Models (with Gurdip Bakshi and Zhiwu Chen)." 2000.
Cao Q., "Do Call Prices and the Underlying Stock Always Move in the Same Direction? (with Gurdip Bakshi and Zhiwu Chen), Review of Financial Studies 13, 549-584." 2000.
Cao Q., "Price Discovery without Trading: Evidence from Nasdaq Pre-opening, (with Eric Ghysels and Frank Hatheway), Journal of Finance 56, 1339-1365." 2000.
Cao Q., "Pricing and Hedging Long-Term Options, (with Gurdip Bakshi and Zhiwu Chen), Journal of Econometrics 94, 277-318." 2000.
Cao Q., "Decimalization and Competition Among Exchanges: Evidence from the Toronto Stock Exchange Cross-listed Securities, (with Heejoon Ahn and Hyuk Choe), Journal of Financial Markets 1, 51-87." 1998.
Cao Q., "Does the Specialist Matter? Differential Execution Costs and Inter-Security Subsidization on the NYSE (with Hyuk Choe and Frank Hatheway), Journal of Finance 52, 1615-1640." 1997.
Cao Q., "Empirical Performance of Alternative Option Pricing Models (with Gurdip Bakshi and Zhiwu Chen), Journal of Finance 52, 2003-2049." 1997.
Cao Q., "Evolution of Transitory Volatility over the Week (with Hyuk Choe), Annals of Economics and Finance, 49-78." 1997.
Cao Q., "What is Special About the Opening: Evidence from NASDAQ (with Hyuk Choe and Frank Hatheway, Seoul Journal of Business, 1-36." 1997.
Cao Q., "Tick Size, Spread and Volume, (with Heejoon Ahn and Hyuk Choe), Journal of Financial Intermediation 5, 2-22." 1996.
Cao Q., "Nonlinear Time Series Analysis of Stock Return Volatility (with Ruey Tsay)." 1993.
Cao Q., "Inequality Constraints in the Univariate GARCH Model, (with Daniel Nelson), Journal of Business & Economic Statistics 10, 229-235." 1992.
Cao Q., "Nonlinear Time Series Analysis of Stock Return Volatility, (with Ruey Tsay), Journal of Applied Econometrics 7, 165-185." 1992.
Cao Q., "Style Drift: Evidence from Small-Cap Mutual Funds (with Peter Iliev, and Raisa Velthuis), Journal of Banking and Finance, 78, 42-57." Journal of Alternative Investments.
Cao Q., "Hedge Fund Holdings and Stock Market Efficiency (with Bing Liang, Andrew Lo and Lubomir Petrasek), Review of Asset Pricing Studies, forthcoming."

Editorships

Pacific-Basin Finance Journal, Co-Editor, January 2009 - Present
Review of Futures Markets, Editorial Board, January 2009 - Present
Review of Derivatives Research, Associate Editor, January 2007 - Present
Review of Quantitative Finance and Accounting, Associate Editor, January 2006 - Present
Pacific-Basin Finance Journal, Associate Editor, January 2006 - January 2008
Journal of Financial Markets, Associate Editor, January 2002 - Present