University of Delaware

Xiaoxia Lou

  • Associate Professor of Finance | University of Delaware
  • Email: lous at
  • Phone: 302-831-8773
  • Office: Purnell Hall, Department of Finance

Academic Employment

Associate Professor, University of Delaware                                                                                            2014—Present
Visiting Faculty, Carroll School of Management, Boston College                                                          Spring 2011
Assistant Professor, University of Delaware                                                                                             2008—2014
Lecturer, University of Delaware                                                                                                                2007—2008


Ph.D., Department of Finance and Business Economics, Foster School of Business, University of Washington
Thesis Title: Short Sellers and Financial Misrepresentation
Thesis Committee: Avraham Kamara, Jonathan Karpoff (Chair), Ed Rice, Ronnie Sadka
M.S., Department of Statistics, Iowa State University
B.A., Department of Insurance and Risk Management, School of Economics, Peking University, Beijing, China

Research Papers (Can be downloaded from my page on SSRN)

  1. The Divergence of Liquidity Commonality in the Cross-section of StocksJournal of Financial Economics, Volume 89, Issue 3, September 2008, Pages 444-466 (with Avraham Kamara and Ronnie Sadka) ‌

    Systematic liquidity has decreased significantly for small-cap firms, but increased significantly for large-cap firms. This increased divergence of systematic liquidity can be explained by the patterns of institutional ownership. ‌

  2. Has the US Stock Market Become More Vulnerable Over Time? Financial Analysts Journal, January/February 2010, Vol. 66, No. 1: 41-52. (with Avraham Kamara and Ronnie Sadka)

  3. Short Sellers and Financial Misconduct.Journal of Finance, Volume 65, Issue 5, October 2010, Pages 1879-1913. (with Jonathan Karpoff)

    Short sellers anticipate the eventual discovery and severity of financial misconduct. They also convey external benefits, helping to uncover misconduct and keeping prices closer to fundamental values.

  4. Liquidity Level or Liquidity Risk? Evidence from the Financial CrisisFinancial Analysts Journal, Volume 67, Issue 3, 2011, Pages 51-62. (with Ronnie Sadka)

    Although considered safe assets in general, liquid stocks underperformed illiquid stocks during the financial crisis of 2008–2009. The performance of stocks during the crisis can be better explained by their historical liquidity betas. These findings therefore highlight the importance of accounting for both liquidity level and liquidity risk in risk-management applications.

  5. Horizon PricingJournal of Financial and Quantitative Analysis, Volume 51, Issue 6,  December 2016, pp. 1769-1793. (with Avraham Kamara, Robert Korajczyk, and Ronnie Sadka)

    Asset risk depends on investment horizon. Value (liquidity) risk is priced over intermediate (short) horizons. Long-horizon institutional investors overweight assets with high intermediate-horizon exposures to value risk and high short-horizon exposures to liquidity risk. The results highlight the importance of investment horizon in determining risk premia.

  6. Invisible Costs and ProfitabilityPortfolio Construction, Measurement, and Efficiency: Essays in Honor of Jack Treynor, Springer 2016 (with Ronnie Sadka)

  7. Price Impact or Trading Volume: Why is the Amihud (2002) Measure Priced? Review of Financial Studies, Volume 30, Issue 12, 2017, Pages 4481-4520 (with Tao Shu) 

    • The pricing of the Amihud measure (A) is not attributable to the construction of the return-to-volume ratio intended to capture price impact (|ret|/DVOL), but is driven by the trading volume component (1/DVOL).We decompose the Amihud measure –ln(A) -using cross-sectional regressions of ln(A) on ln(1/DVOL). We decompose ln(A) into a component determined by ln(1/VOL), and the residual component (Res.ln(A)) that is orthogonal to ln(1/DVOL) We find that the return premium of ln(A) is entirely driven by ln(1/DVOL). The residual component has a negative return premium.
    • Additionally, the high-frequency price impact and spread benchmarks are priced only in January and do not explain the pricing of the trading volume component of the Amihud measure. Additional analyses suggest that the volume effect on stock return is likely caused by mispricing, not by compensation for illiquidity.

  8. Flow-Induced Trading Pressure and Corporate Investment. Journal of Financial and Quantitative Analysis,  Volume 53Issue 1February 2018 , pp. 171-201 (with Albert Wang) 

    The impact of liquidity-motivated institutional trading on firms’ real decisions is not confined to periods of financial crises. Firms subject to mutual fund flow-driven selling pressure reduce share issuance and investment, whereas firms experiencing buying pressure do not increase investment, although they issue more equity. We also find evidence that the effect is not attributed to managerial learning or catering incentives. Rather, flow-driven trading affects investment mainly through its impact on the financing cost.

  9. Media Reinforcement in International Financial Markets, (with Ken Froot, Gideon Ozik, Ronnie Sadka, and Siyi Shen) 

  10. Short-Horizon Beta or Long-Horizon Alpha? (with Avraham Kamara, Robert Korajczyk, and Ronnie Sadka)

  11. Enforcement Waves and Spillover Effects. (with Hae Mi Choi, Jonathan Karpoff) 

Permanent Working Papers

  1. Expected Earnings and the Post-Earnings-Announcement Drift. (with Yaniv Konchitchki, Gil Sadka, and Ronnie Sadka)
  2. Can Liquidity Events Explain the Low-short-interest Puzzle? Implication from the Options Market (with Jefferson Duarte and Ronnie Sadka)