The past couple of decades have seen a significant shift from active to passive investment strategies. We examine how this shift affects financial stability through its impacts on: (i) funds' liquidity and redemption risks, (ii) asset-market volatility, (iii) asset-management industry...

We measure the liquidity profile of open-end mutual funds using the sensitivity of their daily returns to aggregate liquidity. We study how this sensitivity changes around real-activity macroeconomic announcements that reveal large surprises about the state of the economy and after three...

This paper investigates whether mutual fund families acting as service providers in 401(k) plans display favoritism toward their own affiliated funds. Using a hand-collected dataset on the menu of investment options offered to plan participants, we show that fund deletions and additions are less...

We provide novel evidence that hedge fund performance is persistent following weak hedge fund markets, but is not persistent following strong markets. Specifically, we construct two performance measures, DownsideReturns and UpsideReturns, conditioned on the level of overall hedge fund sector...

We study the links between monetary policy and mutual fund flows, and the potential risks to financial stability that might arise from such flows, using data over the 2000-14 period. We find that monetary policy can have a direct influence on the allocation decisions of mutual fund investors. In...

Since the financial crisis, the markets for Bank Loan (BL) and High Yield Bond (HYB) mutual funds (MFs) have grown significantly, with assets under management increasing from $19 billion and $75 billion to close to $117 billion and $225 billion, respectively, as of December 2018. This short...

Although the lack of international portfolio diversification has long interested the financial economics literature, the role of financial intermediaries in the market for diversified portfolios has rarely been studied. In this paper, I introduce a microeconomic aspect of under-diversification...

Market liquidity is expected to facilitate arbitrage, which in turn should affect the liquidity of the assets traded by arbitrageurs. We study this relationship using a unique dataset of equity and bond ETFs compiled from big trade-level data. We find that liquidity is an important determinant...

To date the debate over payday lending has focused on whether access to such lending is on net beneficial or harmful to consumer welfare. However, payday loans are not one product but many, and different forms of lending may have different welfare implications. The current diversity in payday...

Banking the unbanked is a common policy goal, but should this include access to bank accounts for minors? This study estimates how teenagers' access to bank accounts affects their financial development. Using variation in state laws, we show policies that permit access to independently-owned...