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About Me

I am an Associate Professor in the School of Banking and Finance at the University of International Business & Economics in Beijing. I joined UIBE in 2012. I received a Master's in Public Policy from the University of California, Berkeley and a PhD in Economics from the University of California, Davis. My fields of study were econometrics and economic theory.

My current research interests focus on developing theoretical models of banks and financial intermediaries. I am also interested in applying computational methods to economic questions. My main dissertation project developed a model of maturity mismatch as a dynamic inventory management problem.

Before becoming an academic, I worked as a software engineer at several technology start-up firms. Here's my old resume.



Carpio, R., Guo, M., Liu, Y. and Pyun, J. (2021), "Wealth Heterogeneity, Information Acquisition and Equity Home Bias: Evidence from U.S. Household Surveys of Consumer Finance", in Journal of Banking and Finance link

The well-known equity home bias has two components: an extensive and intensive margin. Using data on direct stock holdings of US households, we find that the decision to participate in foreign stock markets depends on investor wealth, with richer investors more likely to participate (the extensive margin). We document a new finding: as investor wealth increases, the portfolio share invested in foreign equities tends to decrease (the intensive margin). A noisy rational expectations equilibrium model with wealth heterogeneity, entry costs, and endogenously chosen information processing capacity can generate the new negative relationship, and help understand the U.S. household equity home bias along both margins.

Carpio, R. and Guo, M. (2021), "Bayesian estimation of the Eurozone currency union effect", in Review of International Economics link

This paper uses Bayesian methods to estimate the European (Monetary) Union effect on trade. The high dimensionality of the parameter space when estimating gravity equations with many dummy variables results in standard hypothesis tests with a large Type I (false positive) error. Bayesian methods are able to handle this problem; they also provide a principled method of model selection that can be applied to different specifications of the dummy variables. Bayesian model selection tests prefer our most unrestricted dummy specification, which includes asymmetric bilateral effects, as well as time‐varying, country‐specific factors. Our estimate shows a zero Euro effect on trade, but a 14.8% increase in imports for a member of the European Union during 1980–2004.

Carpio, R. and Kamihigashi, T. (2020), "Fast Value Iteration: An Application of Legendre-Fenchel Duality to a Class of Deterministic Dynamic Programming Problems in Discrete Time", in Journal of Difference Equations and Applications 26:2, 209-222 link

We propose an algorithm, which we call "Fast Value Iteration" (FVI), to compute the value function of a deterministic infinite-horizon dynamic programming problem in discrete time. FVI is an efficient algorithm applicable to a class of multidimensional dynamic programming problems with concave return (or convex cost) functions and linear constraints. In this algorithm, a sequence of functions is generated starting from the zero function by repeatedly applying a simple algebraic rule involving the Legendre-Fenchel transform of the return function. The resulting sequence is guaranteed to converge, and the Legendre-Fenchel transform of the limiting function coincides with the value function.

Carpio, R. and Guo, M. (2019), "On Equilibrium Existence in a Finite-Agent, Multi-Asset Noisy Rational Expectations Economy", in B.E. Journal of Theoretical Economics vol. 20, no. 1 link

We introduce a novel method of proving existence of rational expectations equilibria (REE) in multi-dimensional CARA-Gaussian environments. Our approach is to construct a mapping from agents’ initial beliefs (which are characterized by a positive semidefinite matrix), to their updated beliefs, after reaching and observing equilibrium; we then show Brouwer’s fixed point theorem applies. We apply our approach to a finite-market version of Admati (1985), which is a multi-asset noisy REE asset pricing model with dispersed information. We present an algorithm to numerically solve for equilibrium of the finite model, as well as several examples illustrating the difference in equilibrium behavior between the finite and infinite models. Our method can be applied to any multi-dimensional REE model with Gaussian uncertainty and behavior that is linear in agents’ information.

Working Papers

"Specialization in Investor Information and the Diversification Discount" with Meixin Guo


We present a theory of the diversification discount based on investor specialization in information; this is modeled by different investors having a lower belief variance for different assets. We show that a discount exists in a general multi-asset, multi-investor setting; the discount increases with the degree of information specialization among investors. We empirically test our model using corporate spinoffs from the USA, using a novel measure of industry similarity based on sell-side analyst behavior. We find that higher abnormal returns on the spinoff announcement date are associated with higher industry dissimilarity between parent and child firms.

Job Market Paper: "A Model of Maturity Mismatch and Fractional-Reserve Banking"

pdf code

In this paper, we present a dynamic model of a banking firm based on inventory management of stochastic cash flows. The bank takes deposits and makes loans, which may have different maturities. The model provides a parsimonious explanation of dividend payouts, maturity mismatch, quantities of credit, and bankruptcy; mismatch arises non-strategically, from profit maximization. Numerical experiments show that maturity mismatch can be optimal if the level of uncertainty in withdrawals is not too high. Uncertainty of both loan repayments and withdrawals can result in a bank that optimally fails in finite time.


Previously Taught:


The code used for my job market paper is on GitHub.

linterp - a C++ header-only library for N-dimensional linear interpolation on a rectangular grid. Implements multilinear and simplicial interpolation, and provides interfaces for Python and Matlab.

delaunay_linterp - a C++ header-only library for N-dimensional piecewise linear interpolation of unstructured data. A Delaunay triangulation with the data points as vertices is created; points inside triangles are interpolated between the values at the triangle's vertices. Python interface is included.

py_tsg - a Python wrapper around the Tasmanian Sparse Grid Library, a C++ library for high-dimensional interpolation and integration using sparse (e.g. Smolyak) grids.