Te Bao

Te Bao
Nanyang Technological University | ntu · Division of Economics

PhD in Economics, University of Amsterdam

About

61
Publications
9,504
Reads
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530
Citations
Citations since 2016
43 Research Items
444 Citations
2016201720182019202020212022020406080
2016201720182019202020212022020406080
2016201720182019202020212022020406080
2016201720182019202020212022020406080
Introduction
I am an associate professor of economics at Nanyang Technological University. I obtained B.A. in Economics from Fudan University in 2006 and Ph.D in Economics from University of Amsterdam in 2012. My research interest is experimental economics and behavioral finance.
Additional affiliations
January 2016 - February 2021
Nanyang Technological University
Position
  • Professor (Assistant)
August 2013 - December 2015
University of Groningen
Position
  • Professor (Assistant)
September 2012 - August 2013
University of Amsterdam
Position
  • PostDoc Position
Education
September 2007 - October 2012
University of Amsterdam
Field of study
  • Economics

Publications

Publications (61)
Article
We investigate how individuals use measures of apparent predictability from price charts to predict future market prices. Subjects in our experiment predict both random walk times series, as in the seminal work by Bloomfield and Hales (2002) (BH), and stock price time series. We successfully replicate the experimental findings in BH that subjects a...
Article
Anufriev et al. study whether more detailed order book information is always better for market efficiency in a modified continuous double auction market. This paper belongs to a broad research agenda on the impact of information transparency and trading speed on market stability. This comment discusses the implication of this research agenda on the...
Article
Full-text available
This paper reviews the recent development and new findings of the literature on learning-to-forecast experiments (LtFEs). In general, the stylized finding in the typical LtFEs, namely the rapid convergence to the rational expectations equilibrium in negative feedback markets and persistent bubbles and crashes in positive feedback markets, is a robu...
Article
A large body of literature concludes a negative association between ethnic diversity and pro-social behavior. Inspired by the works suggesting that the costly punishment would sustain the contribution level in public goods experiment, we compare the economic behavior of Mongolian- and Han-Chinese and investigate how ethnic diversity would affect co...
Article
Recently, concerns have been raised on the adverse impacts of social media on people's subjective well-being. Using a large and representative sample of Chinese individuals, we explore the effects of social media browsing and social media communication on users' life satisfaction. The results show that while social media browsing has a strong negat...
Article
Full-text available
We investigate the effect of gender on the price deviation (bubble) from the fundamental value in a learning-to-forecast experiment. Our results show that gender plays a more prominent role in markets with positive expectation feedback than in markets with negative feedback. In both types of markets, market prices tend to depart more from the funda...
Article
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We report on an experiment examining whether individuals can solve a simple signal extraction problem of the type found in models with imperfect information. In one treatment, subjects must form point predictions based on observing both public and private signals, while in another they receive the same information but must decide on the weight to a...
Preprint
We study the impact of mortality salience on altruistic giving using a laboratory experiment. We find that when primed with the inevitability of death and the limited remaining lifespan, the subjects will tend to think of things "bigger" than themselves, and therefore behave more like maximizers of utilitarian (Coasian) welfare function. We find su...
Article
Full-text available
This paper reviews the recent development and new findings of the literature on learning to forecast experiments (LtFEs). In general, the stylized finding in the typical LtFEs, namely the rapid convergence to the rational expectations equilibrium (REE) in negative feedback markets and persistent bubbles and crashes in positive feedback markets, is...
Article
We investigate experimentally how granting a manager stock ownership and the opportunity to trade shares of a company’s stock influence the manager’s effort and the overall behavior of the market for the company’s shares. In our design, managerial effort affects the fundamental value of the firm. Our findings suggest that endowing a manager with st...
Article
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China established several Pilot Free Trade Zone (PFTZ) in recent years as a major step to deepen trade liberalization. In this paper, we investigate the impact of FTZs on the economy’s capital flow, imports and exports, as well as the underlying mechanisms. We consider the newly established FTZ as a natural experiment, manipulate with the respectiv...
Article
Bao et al. (2017) find that bubbles are less likely to emerge in experimental asset markets when subjects make price forecasts only (Learning to Forecast treatment, LtF) than when they make trading quantity decisions (Learning to Optimize treatment, LtO) or both price forecasts and quantity decisions (mixed treatment). This paper provides two expla...
Article
Full-text available
Asset markets like stock markets are characterized by positive feedback through speculative demand. But the supply of housing is endogenous, and adds negative feedback to the housing market. We design an experimental housing market and study how the strength of the negative feedback, i.e., the price elasticity of supply, affects market stability. I...
Article
Full-text available
We run a learning-to-forecast experiment with an interest rate policy in which the interest rate will increase/lower sharply when the deviation of asset prices from the fundamental value moves above/below a threshold. Our results show that the average price deviation (“bubble”) is significantly lower in the treatments with the interest rate policy...
Article
The prevalence of overweight and obesity is a rapidly growing threat to human health worldwide. Based on the theory of memory utility, we explore the effect of memory capacity on overweight and weight control by building a theoretical model and conducting related empirical research by a double-hurdle model. The result shows that better memory capac...
Article
We present a large-group experiment in which participants predict the price of an asset, whose realization depends on the aggregation of individual forecasts. The markets consist of 21 to 32 participants, a group size larger than in most experiments. Multiple large price bubbles occur in six out of seven markets. The bubbles emerge even faster than...
Article
We present a laboratory experiment designed to investigate the effect of the fee structure on mutual fund choice. We find that subjects tend to ignore periodic and small operating expenses fees and base their decisions on gross, instead of net, returns. A fee in the form of a, much larger, front-end load leads to lock-in into one of the funds. It i...
Article
This paper explores the potential “bright side” of overconfidence. We examine the effects of two types of overconfidence—overestimation and overprecision—on the contribution to the public good in a two-person threshold public good game. Experimental results show that the influence of overconfidence on contribution in public goods crucially depends...
Article
Full-text available
Social media has profoundly reshaped the way people obtain and exchange information. Recently, concerns have been raised on its adverse impacts on people’s subjective well-being. Using a large and representative sample of Chinese individuals, we explore the effects of social media browsing and social media communication on users' life satisfaction....
Article
Full-text available
Heterogeneous memory capacity is largely neglected in the economics literature, although it may have profound economic implications. Adopting the concept of “memory utility” proposed by Gilboa, Postlewaite, and Samuelson (2016), we explore the relationship between memory capacity and individual discounting behavior by building a simple two-period m...
Article
Full-text available
Previous literature in experimental finance finds little support for the effectiveness of interest rate policy in stabilizing asset price bubbles. We run a learning to forecast experiment with an interest rate policy that is strongly responsive to deviation of asset prices from the fundamental. Our result shows that the average price deviation is s...
Article
It is well-known that these nonattended attributes in choice experiments (CE) could cause some bias. A combination of two successive CEs are designed with focus on consumers’ demand for the attributes of baby milk formula in China, where the first CE includes the full set of attributes and the second excludes consumers’ self-reported nonattended at...
Article
Full-text available
This experiment compares the price dynamics and bubble formation in an asset market with a price adjustment rule in three treatments where subjects: (1) submit a price forecast only; (2) choose quantity to buy/sell and (3) perform both tasks. We find deviation of the market price from the fundamental price in all treatments, but to a larger degree...
Article
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We estimate the CAPM model on European stock market data, allowing for asymmetric and fat-tailed return distributions using independent and identically asymmetric power distributed (IIAPD) innovations. The results indicate that the generalized CAPM with IIAPD errors has desirable properties. It is substantially less likely to be rejected than the t...
Article
We run a laboratory experiment to study how human subjects switch between several profitable alternatives, framed as mutual funds, in order to provide a microfoundation for so-called heterogeneous agent models. The participants in our experiment have to choose repeatedly between two, three or four experimental funds. The time series of fund returns...
Article
Full-text available
Adaptive and eductive learning are two widely used ways of modeling the process by which agents learn a rational expectation equilibrium (REE). In this paper we report an experiment where we exploit differences in the conditions under which adaptive and eductive learning converge to REE so as to investigate which approach provides the better descri...
Article
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Drawing on the classic model of federalism, this paper studies the optimal organization forms and relative efficiency of local government bonds financing in two aspects: (1) we find in the issuing of local government bonds, decentralized financing is better in mitigating the soft budget constraint problem, and in promoting local economic growth, wh...
Research
Full-text available
Adaptive and eductive learning are two widely used ways of modeling the process by which agents learn a rational expectation equilibrium (REE). In this paper we report on an experiment where we exploit differences in the conditions under which adaptive and eductive learning converge to REE so as to investigate which approach provides the better des...
Article
Full-text available
This paper investigates the impact of –nonrecourse vs. recourse mortgages on housing price dynamics in major U.S. metropolitan statistical areas for the period from 2000 to 2013. We find evidence that –nonrecourse states experience faster price growth during the boom period (2000–2006), a sharper price drop during the bust period (2006–2009) and fa...
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Expectations play a crucial role in finance, macroeconomics, monetary economics, and fiscal policy. In the last decade a rapidly increasing number of laboratory experiments have been performed to study individual expectation formation, the interactions of individual forecasting rules, and the aggregate macro behavior they co-create. The aim of this...
Article
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This paper investigates the impact of the non-recourse vs. recourse mortgage on the housing price dynamics in American major metropolitan areas (MSAs). We find strong evidence that non-recourse states experience faster price growth during the boom (2000 to 2006) as well as sharper price drop during the bust period (2006-2009). The result lends limi...
Article
Full-text available
Rational Expectations (RE) models have two crucial dimensions: 1) agents correctly forecast future prices given all available information, and 2) given expectations, agents solve optimization problems and these solutions in turn determine actual price realizations. Experimental testing of such models typically focuses on only one of these two dimen...
Article
Full-text available
We run a laboratory experiment that contributes to the finance literature on "return chasing behavior" studying how investors switch between mutual funds driven by past performance of the funds. The subjects in this experiment make discrete choices between several (2, 3 or 4) experimental funds in multiple periods. The time series of funds' profits...
Article
Full-text available
When complete contracting is not possible, allocating control structure becomes the second-best arrangement. This paper analyzes the design of optimal divisional structure within an organization where ex post bargaining between the potential divisional managers is possible. In much the same light as Aghion and Tirole (J Political Econ 105(1):1–29,...
Article
We run an experiment to investigate the effect of past return information and fee structure on fund choice decisions. We find that the fund choice decision is heavily driven by past return even when this information is irrelevant, and this bias can not be mitigated with experience and learning. We also find charging a fee in the form of front end l...
Article
Recent studies suggest that the type of strategic environment or expectation feedback can have a large impact on whether the market can learn the rational fundamental price. We present an experiment where the fundamental price experiences large unexpected shocks. Markets with negative expectation feedback (strategic substitutes) quickly converge to...
Article
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In this paper we want to analyze the internal divisional structure within an organi-
Article
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The theory of interlinked contract: where do we stand? Interlinked contract prevails in less development countries (LDCs). Understanding the rationale, structure and dynamics of such contracts is crucial for a better understanding of economic development and institutional changes and the making of public policies. In this regard, this paper is an a...
Article
Full-text available
This article provides two application of incomplete contract theory to real life problems. In the privatization of public service sectors, we show that the coexistence of private and public ownership is better than either privatizing all firms or let all of them to stay un-privatized, because private and public ownership usually provide different p...

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Projects (3)
Project
We investigate experimentally how granting CEOs with stock ownership and the opportunity to trade influence CEOs’ effort and the overall market efficiency. The findings suggest that, contrary to the publicly held belief, stock ownership does not significantly increase the CEO’s effort. There is, however, greater alignment between investors’ valuation of the firm’s assets and the CEO’s effort decision. It is the investor’s valuation that follows the CEO’s effort, rather than the reverse as is usually argued by the interest alignment hypothesis put forward by proponents of stock ownership plans. That is, investors anticipate the growth of the asset values, and utilize information on the CEO’s portfolio adjustment to produce an effective estimate of the fundamentals, and follow them closely. The forward looking trading strategy enhances the actual intrinsic value discovery process and improves market price quality. Meanwhile, we observe that CEOs tend to accumulate additional stock shares when they are given the opportunity to trade, which leads to higher CEO effort in absolute terms. However, their effort is on average lower than the optimal level, given their increased stock holding, and higher rate of change in managerial effort induces larger asset mispricing, greater costs of transactions, and more volatile market prices. It is interesting to note that in all markets, the deviation of transaction prices from the underlying fundamental values is very small, even in the presence of strategic uncertainty over the effort that governs the movement of the fundamental values.