This paper analyzes the relation between correlation risk and the cross-section of hedge fund returns.Legal framework and investment mandate imply that hedge funds can be severely exposed tocorrelation risk: Hedge funds ability to enter long-short positions can be useful to reduce marketbeta,...

Hedge fund managers differ in ability and investors want to distinguish good ones from bad. Via the design of their investment strategies, better fund managers want to ease this inference problem while worse fund managers want to complicate it. We impose only the minimal restrictions on the...

This paper documents the significant role of ECNs in forming the inside market in NASDAQ securities. We argue that the ECNs need to be exposed to market orders through the SOES system.

We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies - momentum. We find that momentum has earned abnormally high risk-adjusted returns - a...

I study the effect of public information disclosure in a market setting where private information acquisition exhibits strategic complementarity. To overcome the issue of equilibrium multiplicity, I introduce heterogeneous information cost and imperfect information on the cost distribution. The...

Using new transaction-level data for non-financial commercial paper (CP) in the U.S., we show that companies systematically reduce their outstanding short-term debt on quarterly and annual disclosure dates. Constraints on CP lending supply cannot explain this pattern. Instead, companies optimize...

The economy of the European Union has not recovered from the impact of the economic and financial crisis. Growth rates remain low and investment activity is weak. This questions current economic policies of the Economic and Monetary Union, known as austerity. In opposition to fiscal contraction...

Concurrent with the rapid development of the market for catastrophe (cat) bonds, a steady decline in their risk premia has been observed. Whether the latter trend is consistent with the evolution of natural disasters risk is an open question. Indeed, a large share of outstanding risk capital in...

This paper studies whether and why algorithmic traders exhibit one of the most broadlydocumented behavioral puzzles - the disposition effect. We use trade data from the NASDAQ Copenhagen Stock Exchange merged with the weather data. We find that on average, the disposition effect for human...

We analyze the problem of real optimal asset allo cation for a p ensionfund maximising the exp ected CRRA utility of its real disp osable wealth.The financial horizon of the analysis coincides with the random deathtime of a representative subscriber. We consider a very general settingwhere...