Abstract: Imperfections exist in financial markets. Assuming the existence of some market imperfections,

we study market outcomes with a continuous-time model of feedback trading based on fintech. Without

using arguments involving cognitive biases, the model allows us to examine the extent to which the market

price deviates from the fundamental. Depending on the initial market imperfection in the form of under-or

over-pricing, different feedback strategies may have very different impacts on insiders' profit, market depth,

and instantaneous returns and volatilities. The model is able to endogenously generate bubbles and crashes

and offers new insights on the relation between idiosyncratic volatility and returns.

Bio: Lihong Zhang is a professor of Finance in the School of Economics and Management at Tsinghua

University. She holds a Ph.D. in Probability and Mathematical Statistics from the Institute of Applied

Mathematics, Academy of Mathematics and System Sciences, Chinese Academy of Science, and an

M.S. in Probability and Mathematical Statistics and a B.S. in Probability and Mathematical Statistics from

Nankai University. Before joining Tsinghua University, she conducted postdoctoral research in the School

of Mathematical Science at Peking University.  Lihong’s research interests are on issues related to financial

economics, stochastic calculus and its applications, actuarial science, and risk management. Her research has

appeared in MIS Quarterly and Insurance: Mathematics and Economics.