We examine the dynamics of bond correlation using a broad sample of US corporate bonds, and document that bond correlation varies heavily over time. We attribute this variation in bond correlation to variation in risk factor correlation reflecting time-varying flight-to-quality behavior of...

More and more investors apply socially responsible screens when building their stock portfolios. This raises the question whether these investors can increase their performance by incorporating such screens into their investment process. To answer this question we implement a simple trading...

Rationality would suggest that advice-seeking investors receive benefits from costly financial advice. However, evidence documenting these benefits for U.S. investors has so far been lacking. This paper is the first to document that U.S. mutual fund investors indeed receive one of the many...

We develop a new family of estimators of the covariance matrix that relies solely on forwardlooking information. It uses only current prices of plain-vanilla options. In an out-of-sample study we show that a minimum-variance strategy based on these fully-implied estimators outperforms several...

This paper provides implied measures of higher-order dependencies between assets. The measures exploit only forward-looking information from the options market and can be used to construct an implied estimator of the covariance, co-skewness, and co-kurtosis matrices of asset returns. We...

We test the frequently made claim that SRI funds are conventional funds in disguise. For this purpose, we compare the portfolio holdings of SRI funds to conventional funds concerning their social and environmental standards. Our empirical study of US equity funds shows that SRI funds have a...

Expected returns can hardly be estimated from time series data. Therefore, many recent papers suggest investing in the global minimum variance portfolio. The weights of this portfolio depend only on the return variances and covariances, but not on the expected returns. The weights of the global...

This experimental study investigates the impact of affective attitudes on risk and return estimates of stocks. Participants rate well-known blue-chip firms on an affective scale and forecast risk and return of the firms' stock. We find that positive affective attitudes lead to a prediction of...

Expected returns can hardly be estimated from time series data. Therefore, many recent papers suggest investing in the global minimum variance portfolio. The weights of this portfolio are usually estimated by replacing the true return covariance matrix by its time series estimator. However,...