We analyze whether the idiosyncratic risk puzzle noted by Ang et al. (2006, 2009) can be explained by the existence of market participants with different investment horizons. We adopt a wavelet multiresolution analysis to decompose returns distribution for different time scales. Our approach...

We analyze why traditional returns-based tests of market timing ability suggest in many cases that mutual fund managers evidence a negative market timing ability. The explanation is based on asymmetric correlations of stocks, which establishes that correlations are stronger in bear markets than...

One of the major advantages of Equity mutual funds is that they allow retail investors to attain a diversified portfolio, which could not be easily obtained buying individual stocks. Our results indicate that mutual funds are not totally diversified; they hold a significant part of idiosyncratic...

This is a study of how contractual mechanisms can mitigate agency conflicts in sub-advised mutual funds. Sub-advising contracts allow fund families to expand their product offerings to include new investment styles and thereby gain market share. We show that costly contractual arrangements, such...

This empirical paper analyzes the role of investment companies' core competencies in explaining the growing importance of outsourcing within the mutual fund industry. We demonstrate that management companies tend to allocate portfolios that are not within their core competencies (defined as the...

In a moment where humans produce an overwhelming quantity of information and are able to numerically analyze it, we propose to test whether markets are able to incorporate such amounts of information to prices. We transform four million news into a news index that has explanatory power over...