We analyze the implications of dynamic flows on a mutual fund manager's portfolio decisions. In our model, a myopic investor is allowed to dynamically allocate capital between a riskless asset and an actively managed mutual fund who charges fraction of fund fees. The presence of dynamic flows...

A growing literature uses portfolio holdings data to quantify the impact of investor demand on equilibrium prices via counterfactual experiments. The key parameter in relating demand and equilibrium prices is investors’ elasticity of demand with respect to the price. Unlike previous studies,...

We examine international equity allocations at the fund level and show how different returns on the foreign and domestic proportion of portfolios determine rebalancing behavior and trigger capital flows. We document the heterogeneity of rebalancing across fund types, its greater intensity under...

Over the last decade foreign bond portfolio positions in US dollar assets have risen above the reciprocal US investor positions in foreign currencies. In periods of increased economic uncertainty, institutional investors hedge their international bond positions, which creates a net hedging...

The eurozone has a single short-term nominal interest rate, but monetary policy conditions measured by either real short-term interest rates or Taylor rule residuals varied substantially across countries in the period from 2003-2010. We use this cross-country variation in the (local) tightness...

The early stage of the 2007-08 financial crisis was marked by large value losses for bank stocks. This paper identifies the equity funds most affected by this valuation shock and examines its consequences for the nonfinancial stocks owned by the respective funds. We document three key empirical...

This paper addresses the question of optimal currency exposure for a risk-and-ambiguity-avers international investor. A robust mean-variance model with smooth ambiguity preferences is used to derive the optimal currency exposure. In the theoretical part, we show that the sample-efficient...

We use novel data on individual activity in a sports betting market to study the effect of past performance sequences on individual behavior in a real market. The revelation of fundamental values in this market enables us to disentangle whether behavior is caused by sentiment or by superior...

We study empirically whether short selling deters the incorporation of positive information. We find a sizeable reduction of positive information impounding before earnings announcements for stocks more exposed to short selling. The price pressure from short selling cannot explain this effect....

This article analyzes the effect of liquidity risk on the performance of various hedge fund portfolio strategies. Similarly to Avramov et al. (2007), we find that, before accounting for the effect of liquidity risk, hedge fund portfolios that incorporate predictability in managerial skills...