Diversification benefits depend on the correlation between assets. Unfortunately, asset correlation increases when it is most needed. We examine bond correlation using a broad sample of US corporate bonds. We find bond correlation to be higher during the financial crisis in 2008. Increased bond...

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...

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

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 paper develops a simple technique that controls for "false discoveries", or mutual funds that exhibit significant alphas by luck alone. Our approach precisely separates funds into (1) unskilled, (2) zero-alpha, and (3) skilled funds, even with dependencies in cross-fund estimated alphas. We...

Recently there has been a rapid growth in the assets managed by "hedged mutual funds" - mutual funds mimicking hedge funds strategies. In this paper, we examine the performance of these funds relative to hedge funds and traditional mutual funds. We find that despite their use of similar trading...

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...

This paper proposes several new holdings-based measures of fund investment horizon, and examines the relation between manager skills and fund holding horizon. We find that both aggregate holdings and trades of long-horizon funds are informative about superior future long-term stock returns,...