Junyuan Zou

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Job Market Paper

Information Acquisition and Liquidity Traps in Over-the-Counter Markets

Presented at Philadelphia Fed

I analyze the interaction between buyers’ information acquisition and market liquidity in over-the-counter markets with adverse selection. If a buyer anticipates that future buyers will acquire information about asset quality, she has an incentive to acquire information to avoid buying a lemon that will be hard to sell later. However, when current buyers acquire information, they cream-skim the market, leaving a larger fraction of lemons for sale and giving future buyers an incentive to acquire information. A liquid market can go through a self-fulfilling market freeze when buyers start to acquire information. More importantly, if information acquisition continues for a long enough period, the market gets stuck in an information trap with low liquidity: information acquisition worsens the composition of assets remaining on the market, and the bad composition incentivizes information acquisition. This prediction helps explain why the market for non-agency residential mortgage-backed securities experienced a sudden drop in liquidity—as potential buyers realized the need for greater due diligence—but has remained essentially dormant despite a strong recovery in the housing market.

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Other Research

Intervention with Screening in Global Games

with Lin Shen (The Wharton School), submitted.

2017 Liston Meeting Best Graduate Paper Award. Presented at Financial Intermediation Research Society (FIRS), WFA, Finance Theory Group, Lisbon Meeting in Game Theory and Applications, INSEAD.

We analyze a canonical binary-action coordination game under the global games framework. To reduce coordination failure, we propose a novel intervention program that screens agents based on their heterogeneous beliefs of the coordination results. Compared with conventional government-guarantee type of programs, it incurs lower cost of implementation and suffers less from moral hazard problems. In equilibrium, only a small mass of "pivotal agents" receiving medium signals self-select to participate in the program. However, the effect is amplified by higher-order beliefs, and coordination failures can be significantly reduced. With negligible information frictions, the proposed program achieves the first-best outcome at zero expected cost. The proposed program can be applied to reduce coordination failures in a wide range of economic contexts.

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A Search-theoretical Model of Capital Reallocation and Investment (work in progress)

I study capital reallocation and firm investment in an economy, in which firms are heterogeneous in productivity, and they trade used capital in a secondary market with search frictions. Investing firms choose endogenously between buying new capital and searching for used capital on the secondary market. There exists a unique equilibrium which features a cutoff strategy: firms with productivity above a cutoff buy new capital, while less productive firms search for used capital on the secondary market. Two testable implications are derived. First, the ratio of capital reallocation and aggregate investment is counter-cyclical. Second, more productive firms buy a larger share of new capital when they invest. I also provide a novel algorithm that can be used to compute transition dynamics in decentralized asset markets with endogenous participation. Furthermore, I show that when sellers on the secondary market have low bargaining powers, reducing search frictions on the secondary market can reduce total welfare.

Teaching Experience


  • Spring, 2018. Introductory Economics: Macroeconomics (undergraduate), University of Pennsylvania.

Recitation Instructor

  • Fall, 2017 and Spring, 2015. Introductory Economics: Macroeconomics (undergraduate), University of Pennsylvania, Dr. Luca Bossi.

Teaching Assistant

  • Spring, 2018. Corporate Finance (EMBA), The Wharton School, Professor Itay Goldstein.
  • Spring, 2017. Monetary and Fiscal Policy (undergraduate), University of Pennsylvania, Professor Harold Cole.
  • Fall, 2016. Money, Credit, and Banking (undergraduate), University of Pennsylvania, Professor Harold Cole.
  • Spring, 2016. International Economics (undergraduate), University of Pennsylvania, Professor Cecìlia Fieler.
  • Fall, 2014 and Fall, 2015. Introduction to Microeconomic Theory (Ph.D.), University of Pennsylvania, Professor Steven Matthews and Professor Andrew Postlewaite.
Other Information

Honors, Awards, and Scholarships

  • 2017, UECE Lisbon Meetings in Game Theory and Applications, Best Graduate Paper Award.
  • 2017, Western Finance Association, Cubist Systematic Strategies Ph.D. Candidate Award for Outstanding Research.
  • 2014, Robin’s Prize, awarded for the best performance in the Ph.D. preliminary exam.
  • 2013, University of Pennsylvania Scholarship.
  • 2013, Beijing Outstanding Graduates Award.

Macroeconomics, Financial Markets, Information Economics, Search Theory, Over-the-Counter Markets


Department of Economics
The Ronald O. Perelman Center for Political Science and Economics
133 South 36th Street
Suite 150
Philadelphia, PA 19104





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Itay Goldstein

Guillermo Ordonez


Itay Goldstein (co-advisor)
Finance Department, The Wharton School
University of Pennsylvania
Phone: 215-746-0499
E-mail: itayg@wharton.upenn.edu

Guillermo L. Ordonez (co-advisor)
Department of Economics, PCPSE
University of Pennsylvania
Phone: 215-898-1875
E-mail: ordonez@econ.upenn.edu

Benjamin Lester
Research Department
Federal Reserve Bank of Philadelphia
Phone: 215-574-6276
Email: Benjamin.Lester@phil.frb.org

Vincent Glode
Finance Department, The Wharton School
University of Pennsylvania
Phone: 215-898-9023
E-mail: vglode@wharton.upenn.edu

Harold L. Cole
Department of Economics, PCPSE
University of Pennsylvania
Phone:  215-898-7788
E-mail: colehl@sas.upenn.edu

Job Market Candidate Status
Expected Completion Date: May 2019.
I will be available for interviews at the ASSA Annual Meeting in Atlanta in January 2019.