Sitong Ding
Sitong Ding
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Welcome to my website. I am a Ph.D. Candidate in Economics at the London School of Economics and Political Science (LSE) affiliated with the Centre for Macroeconomics, and an Academic Visitor at the Bank of England.
I am on the job market for the 2025-26 academic year! Here's my CV.
My job market paper examines how macro shocks give rise to demand and supply imbalances within segmented financial markets that generate persistent deviations of long-term interest rates from fundamentals. I use transaction-level data from the UK gilt market to identify the sign and dynamics of the shift in gilt holdings across intermediaries in response to monetary policy, and show that the comovement between prices and quantities are consistent with a view of risk pricing arising from intermediary wealth effects.
My other research papers also combine transaction-level data from financial markets and their prices with methods from applied macroeconometrics to study issues pertinent to monetary policy, inflation expectations and asset pricing.
I was formerly a Ph.D. Intern at the Bank of England, and also worked as a research analyst in Asia-ex-Japan Economics Research at Nomura. I received a B.Sc. in Econometrics and Mathematical Economics, M.Sc. in Economics and M.Res. in Economics all from the LSE.
Fields: Macroeconomics, Monetary Economics, Macro-Finance, Empirical Macroeconometrics
Email: S.Ding5@lse.ac.uk
I am on the job market for the 2025-26 academic year! Here's my CV.
My job market paper examines how macro shocks give rise to demand and supply imbalances within segmented financial markets that generate persistent deviations of long-term interest rates from fundamentals. I use transaction-level data from the UK gilt market to identify the sign and dynamics of the shift in gilt holdings across intermediaries in response to monetary policy, and show that the comovement between prices and quantities are consistent with a view of risk pricing arising from intermediary wealth effects.
My other research papers also combine transaction-level data from financial markets and their prices with methods from applied macroeconometrics to study issues pertinent to monetary policy, inflation expectations and asset pricing.
I was formerly a Ph.D. Intern at the Bank of England, and also worked as a research analyst in Asia-ex-Japan Economics Research at Nomura. I received a B.Sc. in Econometrics and Mathematical Economics, M.Sc. in Economics and M.Res. in Economics all from the LSE.
Fields: Macroeconomics, Monetary Economics, Macro-Finance, Empirical Macroeconometrics
Email: S.Ding5@lse.ac.uk
Research Papers
Research Papers
[1] Who Moves the Long End? The Dynamics of Gilt Market Segmentation
Co-authors: Robert Czech [1] Who Moves the Long End? The Dynamics of Gilt Market Segmentation
Job Market Paper
Draft coming soon!
Abstract [+]
Long-term interest rates exhibit excess sensitivity to shocks. Using regulatory data on the universe of UK bond transactions, this paper identifies the joint responses of forward rates and intermediary bond holdings to monetary policy at the long end of the yield curve. Our estimates reveal three novel facts about how monetary policy moves this segmented market. First, long-term forward rates persistently overreact following an initial underreaction relative to the rate path. Second, this excess sensitivity coincides with large balance-sheet adjustments by financial intermediaries that satisfy a set of signs: when monetary policy tightens by 100-basis points, dealer banks cumulatively reduce their long-term bond holdings by £20 billion, or 0.7 percent of UK GDP, while pension funds lengthen duration. Third, these intermediaries only partially recover their initial positions at a much slower pace. We rationalise these findings with a New Keynesian model featuring a segmented bond market with preferred habitats. In response to monetary tightening, a reduction in intermediary wealth generates time-varying risk aversion that increases term premia even as intermediaries reduce the quantities of risk held. Portfolio adjustment costs slow the recovery of arbitrage capacity, amplifying persistence and generating humped-shaped dynamics in the responses of both forward rates and bond holdings. We calibrate the model using transaction-level bond data to match the empirical impulse responses and quantify the effects of bond market segmentation on aggregate demand in general equilibrium.
Co-authors: Saleem Bahaj, Robert Czech and Ricardo Reis
Latest version: April 2025
Revise & Resubmit, American Economic Review
[Bank of England Staff Working Paper No. 1,028][CEPR discussion paper 20157][Blog: Bank Underground][Supplementary Appendix]
Abstract [+]
This paper uses transaction-level data on UK inflation swaps to characterise who buys and who sells insurance against higher inflation, and to introduce new measures of expected inflation. We find that this market is segmented: pension funds trade at long maturities, while hedge funds trade at short maturities, with dealer banks serving as the counterparty for both. We propose three novel identification strategies based on heteroskedasticity, granular instrumental variables, and sign restrictions to estimate demand and supply functions and to separate expectations from frictions in segmented financial markets. Expected inflation is more firmly anchored at long maturities than what swap prices indicate, while prices for short maturity swaps are mostly driven by shocks to frictions. Prices in this market absorb new information quickly, and the supply of long maturity inflation protection is very elastic. We find a strong correlation across institutions between their survey-based expectations and their trading behavior.
This paper examines the trading dynamics in the futures market around monetary policy announcements, using regulatory trade-level data with counterparty identifiers. We document four key findings. First, trading activity intensifies in the days preceding announcements, with informed investors actively positioning ahead of policy decisions. Second, market responses to policy surprises are immediate, with trading volumes peaking within minutes and stabilizing shortly thereafter. Third, trading during the narrow announcement window is highly concentrated, with a small subset of hedge funds accounting for the majority of volume, suggesting that the market’s initial reaction reflects the views of a limited group of participants. Fourth, these hedge funds exhibit a statistically significant ability to anticipate both the target and path components of monetary policy surprises. Taken together, our findings validate the use of narrow event windows in measuring policy surprises, while suggesting that price discovery may be driven by a small set of market participants.
This paper identifies the systematic component of monetary policy in the UK using high-frequency interest rate surprises to scheduled macroeconomic data releases as external instruments in a proxy-SVAR. I first demonstrate that the monetary shocks implied by this procedure are highly correlated (with a sample correlation close to one) with those identified through standard high-frequency identification methods, which instead rely on moment restrictions imposed on the response of asset prices to monetary policy announcements, and use this result to cross-validate proxy-SVAR identification methods in the literature. The main advantage of the proposed method is that it can be used as a diagnostic to indicate whether the specified VAR model is fundamental. When applied to UK data, the proposed method shows that monetary policy shocks have an asymmetrically larger effect only on CPI inflation, and not on the other variables, whenever forward-looking variables—particularly financial variables and the local exchange rate—are excluded from the VAR. These findings suggest that the high-frequency responses of asset prices reflect financial market beliefs about the systematic factors to which monetary policy responds.
Other Work (Pre-PhD)
Bounded Rationality in Rules of Price Adjustment and the Phillips Curve April 2018
Presentations: Georgetown University 2018, CERGE-EI 2018
—Awarded the Kaneda Prize for a Young Outstanding Economist at the XVII Carroll Round, Georgetown University —Awarded 1st Place at the 2018 New Economic Talent Competition, CERGE-EI
Bounded Rationality in Rules of Price Adjustment and the Phillips Curve April 2018
Presentations: Georgetown University 2018, CERGE-EI 2018
—Awarded the Kaneda Prize for a Young Outstanding Economist at the XVII Carroll Round, Georgetown University —Awarded 1st Place at the 2018 New Economic Talent Competition, CERGE-EI
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