About

Jiacui Li is an Assistant Professor in the Department of Finance at the David Eccles School of Business. He conducts empirical and theoretical research focused on capital markets and asset pricing. His recent research demonstrates that correlated trading creates market and style-level price pressures, which explain a significant portion of asset price movements, including over 40% of size and value factor movements and the decline in momentum-related factor profitability after 2002. His work also explores non-standard investor behaviors, such as endogenous inattention among bond investors and the tendency of mutual fund investors to chase Morningstar ratings.

Research topics

• Financial economics
• Economics
• Monetary economics
• Microeconomics
• Statistics
• Mathematics
• Econometrics
• Geography
• Business
• Finance

Selected publications

• Attention Constraints and Financial Inclusion

  Journal of Financial and Quantitative Analysis · 2025-01-23 · 1 citations

  articleOpen access

  Abstract We show that attention constraints on decision-makers create barriers to financial inclusion. Using administrative data on retail loan-screening processes, we find that attention-constrained loan officers exert less effort reviewing applicants of lower socioeconomic status (SES) and reject them more frequently. More importantly, when externally imposed increases in loan officers’ workloads tighten attention constraints, loan officers are even more prone to quickly reject low-SES applicants but quickly accept very high-SES applicants without careful review. Such selective attention allocation further widens the approval rate gap between high- and low-SES applicants—a unique prediction of this attention-based mechanism.

  PublisherOA PDFDOI

• Endogenous Elasticities: Price Multipliers Are Smaller for Larger Demand Shocks <br>

  SSRN Electronic Journal · 2025-01-01

  preprintOpen accessSenior author
  PublisherDOI

• Why do portfolio choice models predict inelastic demand?

  Journal of Financial Economics · 2025-06-02 · 12 citations

  articleOpen accessSenior author

  Classical asset pricing models predict that optimizing investors exhibit extremely high demand elasticities, while empirical estimates are significantly lower—by three orders of magnitude. To reconcile this disparity, we introduce a novel decomposition of investor demand elasticity into two key components: “price pass-through”, which captures how price movements forecast returns, and “unspanned returns”, reflecting a stock’s lack of perfect substitutes. In a factor model framework, we show that unspanned returns become significant when models include “weak factors”. Classical models overestimate demand elasticity by assuming both very low unspanned returns and high price pass-throughs, assumptions that are inconsistent with empirical evidence.

  PublisherDOI

• Discontinued Positive Feedback Trading and the Decline of Return Predictability

  Journal of Financial and Quantitative Analysis · 2023-08-18 · 9 citations

  articleOpen access

  Abstract We show that demand effects generated by institutional frictions can influence systematic return predictability patterns in stocks and mutual funds. Identification relies on a reform to the Morningstar rating system, which we show caused a structural break in style-level positive feedback trading by mutual funds. As a result, momentum-related factors in stocks, as well as performance persistence and the “dumb money effect” in mutual funds, experienced a sharp decline. Consistent with the proposed channel, return predictability declined right after the reform, was limited to the U.S. market, and was concentrated in factors and mutual funds most exposed to the mechanism.

  PublisherOA PDFDOI

• Retail bond investors and credit ratings

  Journal of Accounting and Economics · 2023-03-16 · 32 citations

  article
  PublisherDOI

• What Drives the Size and Value Factors?

  The Review of Asset Pricing Studies · 2022 · 40 citations

  1st authorCorresponding
  • Economics
  • Econometrics
  • Monetary economics

  Abstract I find that approximately 30% of price fluctuations in the Fama-French size and value factors are nonfundamental price pressures driven by correlated fund flows, which generate price movements that revert over time. Is this really demand-based price pressure? I show that the price effects happen exclusively in periods when mutual funds place trades, a fact that is difficult to explain using traditional mechanisms such as unobserved investor preference changes. The estimated price elasticity is also consistent with other studies. Overall, my findings show that a sizable fraction of size and value factor movements do not represent economic risk. (JEL G10, G12, G23, G40)

  PublisherOA PDFDOI

• Prices Are Less Elastic at More Aggregate Levels

  SSRN Electronic Journal · 2022-01-01 · 3 citations

  articleOpen access1st authorCorresponding
  PublisherDOI

• An Information-Based Explanation for Inelastic Demand

  SSRN Electronic Journal · 2022-01-01 · 2 citations

  articleOpen accessSenior author
  PublisherDOI

• What Do Mutual Fund Investors Really Care About?

  Review of Financial Studies · 2021-07-08 · 110 citations

  article

  Abstract We show that mutual fund investors rely on simple signals and likely do not engage in sophisticated learning about managers’ alpha as widely believed. Simplistic performance chasing best explains aggregate flows to the mutual fund space and flows across funds. These results hold for both actively managed and passive index funds. Empirical patterns commonly interpreted as reflecting learning about managerial skill also appear in falsification tests and are mechanical. Our results are consistent with the view that, on average, households are homo sapiens with limited financial sophistication rather than hyperrational alpha-maximizing agents, as often assumed in the literature.

  PublisherDOI

• Attention Discrimination under Time Constraints: Evidence from Retail Lending

  SSRN Electronic Journal · 2021-01-01 · 5 citations

  articleOpen access
  PublisherDOI

Frequent coauthors

• Itzhak Ben‐David

  15 shared

• Andrea Rossi

  University of Arizona

  12 shared

• Yang Song

  University of Washington

  12 shared

• Ed deHaan

  Stanford University

  2 shared

• Wenhao Li

  Ludong University

  2 shared

• Edward M. Watts

  2 shared

• Hexin Zhang

  Edinburgh Napier University

  1 shared

• Bo Huang

  Shenzhen University

  1 shared