We empirically analyze the nature of returns to scale in active mutual fund management. We find strong evidence of decreasing returns at the industry level: As the size of the active mutual fund industry increases, a fund's ability to outperform passive benchmarks declines. At the fund level,...

Our framework for evaluating and investing in mutual funds combines observed returns on funds and passive assets with prior beliefs that distinguish pricing-model inaccuracy from managerial skill. A fund's alpha' is defined using passive benchmarks. We show that returns on non-benchmark passive...

In this paper, I develop a new identification method to solve the problem of simultaneous equations, based on heteroskedasticity of the structural shocks. I show that if the heteroskedasticity can be described as a two-regime process, then the system is just identified under relatively weak...

In this paper I offer an alternative identification assumption that allows one to test for changing patterns regarding the international propagation of shocks when endogenous variables, omitted variables, and heteroskedasticity are present in the data. Using this methodology, I demonstrate that...

This paper examines stock market co-movements. It begins with a discussion of several conceptual issues involved in measuring these movements and how to test for contagion. Standard tests examine if cross-market correlation in stock market returns increase during a period of crisis. The measure...

The empirical literature on contagion has mainly measured the propagation of shocks across countries using daily stock markets, interest rates, and exchange rates. Several methodologies have been used for this purpose, however, the properties of the data introduces important limitations on the...

This study explores multivariate methods for investment analysis based on a sample of return histories that differ in length across assets. The longer histories provide greater information about moments of returns, not only for the longer-history assets, but for the shorter-history assets as...

Asymptotic variance of estimated parameters in models of conditional expectations are calculated analytically assuming a GARCH process for conditional volatility. Under such heteroskedasticity, OLS estimators or parameters in single-period models can posses substantially larger asymptotic...

A four-factor model with two "mispricing" factors, in addition to market and size factors, accommodates a large set of anomalies better than notable four- and five-factor alternative models. Moreover, our size factor reveals a small-firm premium nearly twice usual estimates. The mispricing...