The returns to hedge funds and other alternative investments are often highly serially correlated in sharp contrast to the returns of more traditional investment vehicles such as long-only equity portfolios and mutual funds. In this paper, we explore several sources of such serial correlation...

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,...

Using a large sample of institutional investors' private equity investments in venture and buyout funds, we estimate the extent to which investors' skill affects returns from private equity investments. We first consider whether investors have differential skill by comparing the distribution of...

When there is uncertainty about a CEO's quality, news about the firm causes rational investors to update their expectation of the firm's profitability for two reasons: Updates occur because of the direct effect of the news, and also because the news can cause an updated assessment of the CEO's...

Much work in finance is devoted to identifying characteristics of firms, such as measures of fundamentals and beliefs, that explain differences in asset prices and expected returns. We develop a framework to quantitatively trace the connection between valuations, expected returns, and...

This paper studies how hedge fund activism reshapes corporate innovation. Firms targeted by hedge fund activists experience an improvement in innovation efficiency during the five-year period following the intervention. Despite a tightening in R&D expenditures, target firms experience increases...