Over the past 30 years, mutual funds have become the dominant vehicle through which individual investors prepare for retirement via defined contribution plans. Further, money market mutual funds, which hold $2.7 trillion as of September 2013, are now a major part of the cash economy in the U.S....

We propose a new theory of systemic risk based on Knightian uncertainty (or "ambiguity"). We show that, due to uncertainty aversion, beliefs on future asset returns are endogenous, and bad news on one asset class induces investors to be more pessimistic about other asset classes as well. This...

We test the hypothesis that low visibility shocks to text-based network industry peers can explain industry momentum. We consider industry peer firms identified through 10-K product text and focus on economic peer links that do not share common SIC codes. Shocks to less visible peers generate...

This paper examines whether investors receive compensation for holding crash-sensitive stocks. We capture the crash sensitivity of stocks by their lower tail dependence (LTD) with the market based on copulas. We find that stocks with strong LTD have higher average future returns than stocks with...

In this paper we provide strong evidence that heightened uncertainty in the U.S. real economy or financial markets significantly raises excess returns to the currency carry trade. We posit that this works through the influence of uncertainty on global investors' risk preferences. Macro and...

We investigate how the experience of extreme events, such as the COVID-19 market crash, influence risk-taking behavior. To isolate changes in risk taking from other factors, we ran controlled experiments with finance professionals in December 2019 and March 2020. We observe that their...

In this paper we investigate how the experience of stock market shocks, like the COVID-19 crash, influences risk taking behavior. To isolate changes in risk taking from a variety of other confounding factors during stock market crashes, we ran controlled experiments with finance professionals in...

We study the relation between order imbalance and past returns and firm characteristics and test a number of hypothesis including the disposition effect, momentum and contrarian trading, tax-loss selling and flight-to-quality hypothesis. These hypotheses make predictions about investors buy or...