The de novo evolution of protein-coding genes from noncoding DNA is emerging as a source of molecular innovation in biology. Studies of random sequence libraries, however, suggest that young de novo proteins will not fold into compact, specific structures typical of native globular proteins. Here we show that Bsc4, a functional, natural de novo protein encoded by a gene that evolved recently from noncoding DNA in the yeast S. cerevisiae, folds to a partially specific three-dimensional structure. Bsc4 forms soluble, compact oligomers with high β sheet content and a hydrophobic core, and undergoes cooperative, reversible denaturation. Bsc4 lacks a specific quaternary state, however, existing instead as a continuous distribution of oligomer sizes, and binds dyes indicative of amyloid oligomers or molten globules. The combination of native-like and non-native-like properties suggests a rudimentary fold that could potentially act as a functional intermediate in the emergence of new folded proteins de novo.

We analyze the relationship between greater bank competition and the screening of potential borrowers. Using a large sample of Chinese private firms and China's entry into the WTO as a unique setting leading to greater bank competition, we find the following. First, the sensitivity of bank credit to prior borrowing-firm performance increases after China's WTO entry. This sensitivity increase is greater in more bank-dependent industries and smaller in Chinese regions with greater financial sector development. Second, the increase in the sensitivity of bank credit to firm performance is much greater for state-owned firms compared to private firms. Third, the effect of bank credit on subsequent firm productivity and performance is greater for loans given after China's WTO entry compared to those given prior to WTO entry. Overall, the results of our empirical analysis suggest that the stringency of bank screening of borrowers in China increased with greater banking sector competition.

We propose a novel 4/2 rough and smooth stochastic volatility model by combining the rough Heston (rough 1/2) and smooth 3/2 models through a convex specification. This parsimonious two-factor model admits semi-closed-form pricing formulas for equity and volatility index (VIX) derivatives, while capturing key stylized facts documented in empirical studies. The model flexibly generates elasticity of variance estimates consistent with empirical findings from equity markets and produces realistic variance distributions. Although the rough 1/2 component carries a small weight, our numerical experiments confirm a degree of roughness comparable with that obtained with the rough Heston model. Empirical analysis using S&P 500 and VIX option data shows that the model outperforms benchmark specifications both in- and out-of-sample. We further provide insights into how rough volatility modeling influences the estimation of risk-neutral return moments and variance risk premia.

This study examines how holding voting shares in banks can impact the improvement of firms’ investment efficiency in the Chinese capital market. We found that bank ownership improved firms’ investment efficiency by mitigating both overinvestment and underinvestment and by improving investment sensitivity to investment opportunities. We further found that alleviation of overinvestment in firms was driven by the enhancement of corporate governance (disclosure channels). The better corporate governance in bank holding firms reduced corporate cash holdings and controlling shareholder expropriations. Moreover, we found that this bank-firm connection reduced underinvestment by mitigating financial constraints (financing channels), through the raising of more bank loans and the reduction of the cash flow sensitivity of cash holdings. This connection also served as a buffer when bank lending is tightened. Finally, we found that bank ownership had a more pronounced impact on improving investment efficiency in non-SOEs, in firms located in provinces with low marketization, and in firms without institutional investors.

The objective of this paper is to develop a theoretical analysis of “mandatory convertibles,” which are securities that automatically (“mandatorily”) convert to common stock on a pre-specified date. We consider a firm facing a financial market characterized by asymmetric information and significant costs in the event of financial distress. The firm can raise capital either by issuing mandatory convertibles, or by issuing more conventional securities like straight debt, ordinary convertibles, or equity. We show that, in equilibrium, the firm issues straight debt or ordinary convertibles if the extent of asymmetric information facing it is large, but the probability of being in financial distress is relatively small; it issues mandatory convertibles if it faces a smaller extent of asymmetric information but a greater probability of financial distress. Our model provides a rationale for the three commonly observed features of mandatory convertibles: mandatory conversion, capped (or limited) capital appreciation, and a higher dividend yield compared to common stock. We also characterize the equilibrium design of mandatory convertibles.

Using a unique dataset from the Shanghai Stock Exchange, we study the relation between daily open-to-close stock returns and order imbalances, and the commonality in order imbalances across individual, institutional, and proprietary investors. We find that institutional (proprietary) order imbalances have a larger price impact, but account for a significantly smaller proportion of daily price fluctuations. Commonality is much stronger for individual, rather than institutional (proprietary), order imbalances. Institutional (proprietary) investors favor large capitalization stocks, and co-movement in institutional (proprietary) order imbalances is stronger for these stocks.

We provide the first systematic evidence on the link between long‐short anomaly portfolio returns—a cornerstone of the cross‐sectional literature—and the time‐series predictability of the aggregate market excess return. Using 100 representative anomalies from the literature, we employ a variety of shrinkage techniques (including machine learning, forecast combination, and dimension reduction) to efficiently extract predictive signals in a high‐dimensional setting. We find that long‐short anomaly portfolio returns evince statistically and economically significant out‐of‐sample predictive ability for the market excess return. The predictive ability of anomaly portfolio returns appears to stem from asymmetric limits of arbitrage and overpricing correction persistence.

We develop a model in which customer capital depends on key talents' contribution and pure brand recognition. Customer capital guarantees stable demand but is fragile to financial constraints risk if retained mainly by talents, who tend to quit financially constrained firms, damaging customer capital. Using a proprietary, granular brand‐perception survey, we construct a firm‐level measure of the inalienability of customer capital (ICC) that captures the degree to which customer capital depends on talents. Firms with higher ICC have higher average returns, higher talent turnover, and more precautionary financial policies. The ICC‐sorted long‐short portfolio's spread comoves with financial constraints factor.

We design a field experiment to explore the use of social comparison to increase contributions to an online community. We find that, after receiving behavioral information about the median user's total number of movie ratings, users below the median demonstrate a 530 percent increase in the number of monthly movie ratings, while those above the median decrease their ratings by 62 percent. When given outcome information about the average user's net benefit score, above-average users mainly engage in activities that help others. Our findings suggest that effective personalized social information can increase the level of public goods provision.

We show that, motivated by sensation seeking, hedge fund managers who own powerful sports cars take on more investment risk but do not deliver higher returns, resulting in lower Sharpe ratios, information ratios, and alphas. Moreover, sensation‐seeking managers trade more frequently, actively, and unconventionally, and prefer lottery‐like stocks. We show further that some investors are themselves susceptible to sensation seeking and that sensation‐seeking investors fuel the demand for sensation‐seeking managers. While investors perceive sensation seekers to be less competent, they do not fully appreciate the superior investment skills of sensation‐avoiding fund managers.