Publications Working Papers Review on Research Vitae Random Musings

OSU Finance

Yale SOM

Zhiwu Chen

Professor of Finance

(Starting July 1, I will join Yale University as Professor of Finance)

After June 25, send correspondence to:

Yale School of Management
135 Prospect Street
New Haven, CT 06520, USA 		Until then, send to:
Fisher College of Business
The Ohio State University
2100 Neil Avenue
Columbus, OH 43210
E-mail: Chen@cob.ohio-state.edu

Welcome!

On this site, you can get information about my research and professional background. My research and teaching interest is mostly in the stock markets, bond markets, options and futures markets, and the macro economy. I started my research career on the implications of demographic changes on capital markets, and continued into investigating the connections between the spirit of capitalism and financial market prices. Other areas in which I have published work include financial innovations, asset pricing in frictional economies, and options pricing. You can read about my past research in a short essay.

I have devoted most of my recent efforts to stock valuation and options pricing. Equity valuation is a practically exciting and intellectually challenging problem that both researchers and practitioners have not been able to successfully solve. On the one hand, in their daily investing life money managers and individual investors have to face such direct questions as:

On the other hand, academic asset pricing theory has almost exclusively focused on understanding and explaining a stock's expected return, rather than on determining the stock's fair value. Of course, understanding and explaining each stock's expected return is important and fundamental for solving the stock valuation problem. But, that is only one major step to solving the problem. As a practical and empirical matter, one cannot observe what the expected return is on, say, Intel going one year forward, making it at best difficult (if ever possible) to empirically judge whether any given expected-return theory works or not. Still, even if one would know what the expected future return is on Intel, it would not be sufficient to allow one to know whether $130 per share is too high or too low for Intel.

Ultimately, a "good" asset pricing theory should be judged based on whether the model-determined stock price from the theory is, in some way and according to certain yardsticks, consistent with the directly observed market price for the stock.

Random Musings on Expected Returns vs Stock Valuation

"I have a good theory that can explain the expected future return on every stock," says John to Joe.

"So, what is the expected one-year-forward return on IBM today?" Joe replies excitedly.

"Aaaaaaaaah .... I don't know and I cannot determine it. My theory can explain it, though. Once the expected IBM return is known, that is."

You can read Other random musings.

EDUCATION
Ph. D. --Yale University, 1990
M. S.--Changsha Institute of Technology, China, 1986
B. S.--Central-South University of Technology, China, 1983
 
HONORS
 
COURSES TAUGHT
Business Finance 920 -- Theory of Finance
Business Finance 723 -- Futures and Options
Investments: Theory and Practice

Last updated June 12, 1999.