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We show that the stock market may fail to aggregate information even if it appears to be efficient, and that the resulting decrease in the information content of prices may drastically reduce welfare. We solve a macroeconomic model in which information about fundamentals is dispersed and...
Persistent link: https://www.econbiz.de/10013125571
Household investors chase stock market returns. Surveys suggest that households intend to "ride the bubble" by buying …
Persistent link: https://www.econbiz.de/10013049679
Closed-end mutual funds provide one of the few cases in which economists can observe quot;fundamentalquot; values directly, and compare them to market values: the fundamental value of a closed-end fund is simply the net asset value of its portfolio. We use the difference between prices and asset...
Persistent link: https://www.econbiz.de/10012763498
During the past few decades, the fraction of the equity market owned directly by individuals declined significantly. The same period witnessed investment trends that include the growth of indexing as well as shifts by active managers toward lower fees and more index-like investing. I develop an...
Persistent link: https://www.econbiz.de/10013054870
We study liquidity transformation in mutual funds using a novel data set on their cash holdings. To provide investors with claims that are more liquid than the underlying assets, funds engage in substantial liquidity management. Specifically, they hold substantial amounts of cash, which they use...
Persistent link: https://www.econbiz.de/10012987135
We derive equilibrium asset prices when fund managers deviate from benchmark indices to exploit noise-trader induced distortions but fund investors constrain these deviations. Because constraints force managers to buy assets that they underweight when these assets appreciate, overvalued assets...
Persistent link: https://www.econbiz.de/10013047402
This paper examines the proposition that fluctuations in discounts on closed end funds are driven by changes in individual investor sentiment toward closed end funds and other securities. The theory implies that discounts on various funds must move together, that new funds get started when...
Persistent link: https://www.econbiz.de/10012756869
correlated in most villages with portfolio-choice estimates. The heterogeneity matters for policy: Although the average household …
Persistent link: https://www.econbiz.de/10013131495
the rest of the economy via high unemployment and reduced labor earnings, which reduced household contributions to Social …
Persistent link: https://www.econbiz.de/10013123696
This paper re-examines the classic question of how a household should optimally allocate its portfolio between risky …
Persistent link: https://www.econbiz.de/10013125573