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. I am a CFA charterholder.

Research Interests

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

Publications

Exchange-Traded Funds and Transparency in Over-the-Counter Markets, Review of Finance 29(4):1043–1065 (2025)

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.

Working Papers

Local Informed Investors and Bond Offerings, accepted at Review of Finance

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.

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

with Sergey Chernenko

Abstract: We use novel data on daily trading and cash of open-end municipal bond funds to study the dynamics of flow-induced trading. Daily regressions reveal much stronger short-term reliance on cash than suggested by monthly data. The effect of liquidity buffers is nonlinear and depends strongly on their composition. Flow-induced sales decrease with average markups and increase with expected future aggregate outflows. We estimate that a mandatory 10% liquidity buffer would have significantly reduced sales during the COVID-19 pandemic, but the effects depend strongly on buffer composition and whether funds are permitted to use liquidity buffers for bond purchases.

The Anatomy of Mutual Fund Liquidity Creation

with Sergey Chernenko

Abstract: How do mutual funds create liquidity? We measure the dollar value of liquidity created by open-end municipal bond funds as the difference between the markups investors would have paid trading bonds directly in response to their liquidity shocks and the markups funds actually incur trading in response to redemptions. Because this comparison prices the servicing of the same realized redemptions, it decomposes exactly into three channels: flow netting (subscriptions offsetting redemptions), liquidity management (outflows met without bond sales), and trade execution (funds trading at institutional rather than retail cost). The channels contribute roughly equally—71, 53, and 45 basis points per dollar of redemptions—so most of the value funds create comes from \emph{not} trading rather than from trading well. The decomposition reveals trade-offs invisible in the aggregate: cash buffers and shareholder base diversification are each associated with more liquidity creation through some channels and less through others. An event study around new share class introductions shows that funds causally build netting capacity by diversifying their investor base. The association between cash buffers and liquidity management nearly doubles during periods of aggregate outflows: buffers act as insurance that pays off when liquidity is scarcest. Liquidity creation per dollar of redemptions has fallen by more than half since 2009, driven by transparency-induced compression in retail markups. In aggregate, municipal bond funds create $1.6–2.4 billion of liquidity services per year—44 basis points of assets, comparable to average management fees of 43 basis points.

The Fragility Tax: How Mutual Fund Ownership Links Segmented Markets

with Huseyin Gulen

Abstract: Open-end funds' retail liability structure transmits equity shocks across otherwise-segmented asset classes, producing a structural cost-of-capital wedge in municipal bonds. Bonds held by municipal funds with high stock-market sensitivity trade at yield spreads 14–25 basis points wider than same-issuer comparables, equivalent to a multi-notch credit downgrade. We call this the Fragility Tax. When stocks fall, retail fund investors redeem municipal fund shares, forcing fire-sales priced ex ante. Only direct, liability-driven fund beta predicts yields, ruling out equity-correlated fundamentals. Fickle capital and fund liability structure raise aggregate borrowing costs by $2.5 billion annually, a pecuniary externality on local public finance.

Forced Sales and Dealer Choice in OTC Markets

with Sergey Chernenko

(new draft available upon request)

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.

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