Viet-Dung (Dave) Doan

Welcome to my page!

I am an Assistant Professor of Finance at Hong Kong Baptist University. I received my Ph.D. in Finance from Purdue University in 2023. My research interests span financial intermediation, over-the-counter markets, and information asymmetry. My current research centers around mutual funds' and ETFs' trading in the municipal bond market.

Research Interests

Mutual Funds, Exchange-Traded Funds, Over-the-Counter Markets, Municipal Bonds, Information Asymmetry

Working Papers

Exchange-Traded Funds and Transparency in Over-the-Counter Markets, Accepted at Review of Finance

Presented at AFA PhD Poster Session 2021, MFA 2021, FMA 2021, UT Austin PhD Student Symposium 2021

Abstract: This paper explores a new channel through which exchange-traded funds (ETFs) can affect underlying asset prices. In over-the-counter markets, daily disclosure of ETF portfolio holdings increases price transparency and thereby retail investors' bargaining power. I show that ETF-held municipal bonds have significantly lower dealer markups than observationally similar non-ETF-held bonds. This effect cannot be explained by bond selection or ETFs' own trading activity. Rather, ETFs' disclosure of end-of-day bond pricing is associated with lower retail markups by 5-9 basis points.

Informed Investors and Bond Offerings

Presented at MFA 2022, FMA 2022, Sydney Banking and Financial Stability Conference 2023, SFA 2024

Semi-finalist for the 2022 FMA Best Paper in Investments

Abstract: This paper documents a non-monotonic impact of local mutual funds on the pricing of municipal bond issuance. Offering yield spreads are higher in states where municipal bond funds' headquarters are located, and in states with larger aggregate local fund size. However, controlling for local fund size, yield spreads decrease as the number of local fund families increases. These findings are consistent with a security pricing model with multiple imperfectly informed investors and with the empirical evidence supporting local funds' informational advantage. Specifically, mutual fund trades predict local bonds’ credit rating changes.

Mutual Fund Liquidity Creation

with Sergey Chernenko

(new draft available upon request)

Presented at MFA 2022, AFA 2023

Abstract: We develop a novel measure of the dollar value of liquidity created by open-end mutual funds. Our measure compares the cost to investors of trading on their own in response to liquidity shocks with the costs incurred by open-end mutual funds when trading in response to redemptions. Applying this measure to municipal bond mutual funds, we show that over the 2009-2017 period funds provide liquidity services worth 1.88 cents per dollar of gross redemptions or 50 basis points of fund assets per year. The aggregate value of liquidity services provided during this period was $14-23 billion. We decompose liquidity creation into three components: 1) flow netting, 2) liquidity management, and 3) trade execution, and explore cross-sectional and time-series variation in liquidity creation.

Forced Sales and Dealer Choice in OTC Markets

with Sergey Chernenko

(new draft available upon request)

Presented at AFA 2022, Fixed Income and Financial Institutions Conference 2022

Abstract: We use trade-level data to study how municipal bond mutual funds trade in response to daily flows. Out of a dollar of outflows, 66–73 cents is initially satisfied using cash buffers. When forced to sell bonds to satisfy redemptions, funds sell more liquid bonds and trade with more central dealers, who may offer faster execution. Forced sales are especially likely to involve more central dealers when funds have little cash, sell lower rated bonds, or sell after periods of aggregate outflows. Funds incur larger markups when trading with more central dealers, but only when selling in response to outflows.

Flow-Induced Trading: Evidence from the Daily Trading of Municipal Bond Mutual Funds

with Sergey Chernenko

Presented at Brookings Institution's Annual Municipal Finance Conference 2024, Financial Stability Conference 2024, Australasian Finance & Banking Conference 2024

Abstract: We use novel data on the daily flows, trading, and cash buffers of open-end municipal bond mutual funds to study the dynamics of fund flows and trading activity. We document a much stronger reliance on cash buffers than would be suggested by monthly regressions. Although the one-month responses of sales and purchases are very similar, their dynamics are different, with sales being much quicker to respond to outflows. We show that the responsiveness of sales to outflows decreases with the level of markups and increases with aggregate outflows, even controlling for the effect of aggregate outflows on cash buffers.

Cross-Market Bond Pricing

Abstract: This paper explores the cross-market pricing implications introduced by mutual funds in a relatively isolated market—the municipal bond market. Bonds held by open-end mutual funds, whose returns are more sensitive to the stock market, exhibit higher yield spreads of up to 25 basis points. This pricing differential persists even when controlling for bond beta, bond characteristics, the fund's return sensitivity to the municipal bond market, and the characteristics of the fund's portfolio. Evidence indicates that high-beta funds tend to experience subsequent outflows, prompting the market to factor in the potential flow-induced sales of the underlying bonds.

Work in Progress

Social Capital and Municipal Debt Utilization: Evidence from Municipal Bond Referendum

with Sergey Chernenko, Ha Diep-Nguyen, Nathaniel Feige, and W. Ben McCartney

(preliminary draft here)

Loan Networks

with Abhishek Bhardwaj and Botao Wu