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...

We hypothesize and find that the value of active management depends on characteristics of markets and investors. Using unique data, we focus on the performance of actual passive and active equity positions of an important category of institutional investors (defined benefit pension plans) from...

We investigate why investors may be willing to participate in active management, notwithstanding that the average manager is likely to generate negative alpha after fees. We model the alpha an investor expects from a dynamic strategy of investing in a portfolio of active investment managers, and...

This study investigates whether the relation between macro-level fund flow and market returns varies between the retail and institutional fund management markets. We find evidence of a contemporaneous relation between flow and market return for retail funds and also find evidence to support the...

We propose and test a framework of private information acquisition and decision timing for asset allocators hiring outside investment managers. Using unique data on due diligence interactions between an allocator and 860 hedge funds, we find that the production of private information complements...

We study the equilibrium implications of a multi-asset economy in which asset managers are subject to different benchmarks, and demonstrate how heterogeneous benchmarking generates a mechanism through which fundamental shocks propagate across assets. Fluctuations in asset managers' capital...

This study analyzes how equity mutual fund investor behavior has changed over time, and the associated impact on investor returns. First, we find that from 1991-2016 investor return-chasing behavior declined and more recently disappeared, while investor flows have become more sensitive to...

We provide the first in-depth examination of exchange-traded funds (ETFs) within actively managed mutual fund (AMMF) portfolios to better understand why AMMFs make substantial investments in passive ETFs. We examine the association between holding ETF positions and AMMF performance, as well as...

We examine the proposition that investor attention affects the optimality of financial decisions. Using a novel dataset on the sociodemographic characteristics of visitors to mutual fund websites, we link the characteristics of investors to the characteristics of mutual funds that capture their...