Jun Li

I am an assistant professor in finance at University of Texas at Dallas. My research lies in the area of empirical and theoretical asset pricing, and focuses on the time series and cross-sectional variations of asset returns.

Office 14-510
Jindal School of Management
University of Texas at Dallas
800 West Campbell Road
Richardson, TX 75080
United States

Phone: (972) 883-4422
Email: [email protected]

Curriculum Vitae

Jun Li



1. "The expected investment growth premium" (with Huijun Wang) [SSRN]

Abstract: A neoclassical model with investment lags predicts that a firm's risk premium increases with its planned investment. Using a novel measure of investment plans, namely, expected investment growth (EIG), we document that high EIG firms earn an annualized return that is 15.4% higher than low EIG firms in the US sample from July 1968 to December 2016. This EIG premium cannot be captured by leading asset pricing models and is confirmed in various robustness checks. Further analyses provide empirical evidence for the embedded leverage effect of planned investment, which creates cross-sectional heterogeneity in the exposure to business cycle risk.

-Presented at Hong Kong University of Science and Technology, Chinese University of Hong Kong, City University of Hong Kong, Hong Kong Polytechnic University, Nanyang Technological University, University of Delaware, 2017 BI CAPR's Workshop on Investment and Production Based Asset Pricing, China International Conference in Finance, Baltimore Area Finance Conference. To be presented at Financial Management Association Annual Meeting.

2. "The opposing effects of information complexity and information content on return volatility" (with Frederico Belo, Xiaoji Lin, and Xiaofei Zhao) [SSRN]

Abstract: We evaluate the impact of complexity and content of new information on stock return volatility dynamics around 10-K fillings. On average, return volatility increases by 0.4% in the first four weeks after the release of the report, followed by a 2.6% decrease in the subsequent six weeks. This hump-shaped dynamics is more pronounced for firms with larger 10-K reports. The effects are economically significant: an options-based investment strategy exploring the volatility dynamics generates 17.3% annualized return spread. Our findings highlight the importance of timing for understanding the opposing effects of complexity and content of new information on asset prices.

- 2015 Crowell Second Prize
- Semifinalist for the 2016 FMA Best Paper Award in Investment
- Presented at University of Waterloo, University of Oklahoma, PanAgora Asset Management, Cubist, American Finance Association Annual Meeting, Lone Star Finance Conference, Mid Atlantic Finance Research Conference in Finance, Midwest Finance Association, China International Conference in Finance, Financial Management Association Annual Meeting

3. "Aggregate expected investment growth and stock market returns" (with Huijun Wang and Jianfeng Yu) [SSRN]

Abstract: Consistent with neoclassical models with investment lags, we find that a bottom-up measure of aggregate investment plans, namely, aggregate expected investment growth (AEIG), negatively predicts future stock market returns, with an adjusted in-sample R-squared of 18.5% and an out-of-sample R-squared of 16.3% at the one-year horizon. The return predictive power is robust after controlling for popular macroeconomic return predictors, in subsample periods, as well as in other G7 countries. Further analyses suggest that the predictive ability of AEIG is more likely to be driven by the time-varying risk premium than by behavioral biases such as extrapolative expectations.

-Presented at Asian Development Bank Institute, Peking University, University of International Business and Economics, University of Sydney, SFS Cavalcade, SGF Conference. To be presented at China International Conference in Finance, Asian Finance Association Annual Meeting, Northern Finance Association Annual Meeting.

4. "Decomposing the size premium" (with Zhiyao Chen and Huijun Wang) [SSRN]

Abstract: We decompose firm size into four components: the lagged 5-year component that represents size five years ago, and the long-run, intermediate-run, and short-run components that capture changes in size in each horizon. We find that while the lagged 5-year component explains about 80% of the cross-sectional variation in size, it has little return predictability. In contrast, the long-run change in size component explains only 18% of size, but it completely captures the size premium. Our decomposition also sheds light on the January effect, the disappearance of the size premium since early 1980s, and the return behaviors of new entrants.

-Presented at Midwest Finance Association Annual Meeting and SGF Conference. To be presented at China International Conference in Finance and Financial Management Association Annual Meeting.


1. "A unified economic explanation for profitability premium and value premium" (with Leonid Kogan and Harold H. Zhang)

Abstract: We jointly explain the gross profitability premium and the value premium in a dynamic structural model. Co-existence and negative correlation between profitability and value factors in the data challenge existing asset pricing models because high (low) gross profitability firms resemble growth (value) firms. We demonstrate that the profitability premium is driven by more productive firms having higher exposures to aggregate demand shocks, whereas the value premium is created by high book-to-market firms having more assets in place relative to growth options in their asset composition. Our model replicates co-existence of negatively correlated profitability premium and value premium. We also uncover a novel profitability decomposition and the stronger return predictive power of transitory profitability as evidenced in the data.

-Presented at University of Oklahoma, SFS Cavalcade, Midwest Finance Association. To be presented at Western Finance Association Annual Meeting, China International Conference in Finance.

2. "Asset composition, stochastic volatility and cross-sectional stock returns" (with Zhiyao Chen and Kai Li)


1. "Investor attention, psychological anchors, and stock return predictability" (with Jianfeng Yu), Journal of Financial Economics, Vol. 104, pp. 401-419, May 2012 [SSRN]

2. "Government spending, political cycles and the cross section of stock returns" (with Frederico Belo and Vito Gala), Journal of Financial Economics, Vol. 107(2), pp. 305-324, Feb 2013 [SSRN]

3. "Asset pricing in production economies with extrapolative expectations" (with David Hirshleifer and Jianfeng Yu), Journal of Monetary Economics, Vol. 76, pp. 87-106, Nov 2015 [SSRN] Internet Appendix

4. "Short-run and long-run consumption risks, dividend processes, and asset returns"(with Harold H. Zhang), Review of Financial Studies, Vol. 30, pp. 588-630, Feb 2017 [SSRN] Internet Appendix

5. "Explaining momentum and value simultaneously", Forthcoming at Management Science [SSRN]

6. "Labor-force heterogeneity and asset prices: the importance of skilled labor" (with Frederico Belo, Xiaoji Lin, and Xiaofei Zhao), Review of Financial Studies, Vol. 30, pp. 3669-3709, Oct 2017 [SSRN]. Industry level labor skill data here.


1. "Expected Investment Growth and Cross Sectional Stock Returnsly" (with Huijun Wang), [SSRN]


FIN 3320, Business Finance: Spring 2018

FIN 4300, Investment Management: Spring 2013-2017

FIN 7335, Topics in Empirical Asset Pricing: Spring 2015, 2017