Tianyu Wang

We find dealer‐level evidence that recent regulation on the leverage ratio requirement causes deviations from covered interest parity. Our analysis uses a unique data set of currency derivatives with disclosed counterparty identities together with exogenous variation introduced by the U.K. leverage ratio framework. Dealers who are affected by the regulatory shock charge an additional premium of about 20 basis points per annum for synthetic dollar funding relative to unaffected dealers. This finding holds even after controlling for changes in clients' demand. Also, some clients increase their trading activity with unaffected dealers with whom they already had a preexisting relationship.

We study the impact of foreign institutional investors on price efficiency with firm-level international data. Using additions to the MSCI index and the U.S. Jobs and Growth Tax Relief Reconciliation Act as exogenous shocks to foreign ownership, we show that greater foreign ownership increases stock price informativeness, especially in developed economies. This increase arises from new information that foreign investors bring in and displacement of less-informed domestic retail investors. Finally, we show that foreign ownership, particularly from active investors, increases market liquidity, reduces firms’ cost of equity, and increases firms’ real investment growth.