The benchmarks of a Sovereign Wealth Fund (SWF) should take into account the economic and political context behind the creation of the SWF and the role the SWF plays as one part of a government's overall policy. The first benchmark of legitimacy ensures that the capital of the SWF is not...

Asset owners (principals) typically do not manage their own investments and leave this job to delegated managers (agents). What is best for the asset owner, however, is usually not best for the fund manager. Additional agency conflicts arise when the asset owner does not know the quality and...

Using data on 1,312 US equity active mutual funds with $3.9 trillion in AUM, we analyze the link between funds' “bottoms up” holdings-based environmental, social, and governance (“ESG”) scores and funds' active returns, style factor loadings, and alphas. We find that funds with high ESG...

Over-the-counter (OTC) stocks are far less liquid, disclose less information, and exhibit lower institutional holdings than listed stocks. We exploit these different market conditions to test theories of cross-sectional return premiums. Compared to premiums in listed markets, the OTC illiquidity...

Today there are more active equity mutual funds and equity ETFs than individual stocks. Funds differ meaningfully in terms of individual stock holdings, and we examine the factor exposures of the typical fund and the cross section of holdings of different funds. We also examine the most common...

We investigate the leverage of hedge funds using both time-series and cross-sectional analysis. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early...

Option volatilities have significant predictive power for the cross section of stock returns and vice versa. Stocks with large increases in call implied volatilities tend to rise over the following month whereas increases in put implied volatilities forecast future decreases in next-month stock...

Long‐horizon investors have an edge. They can ride out short‐term fluctuations in risk premiums, profit from periods of elevated risk aversions and short‐term mispricing, and they can pursue illiquid investment opportunities. The turmoil we have seen in the capital markets over the last...

Regime switching models can match the tendency of financial markets to often change their behavior abruptly and the phenomenon that the new behavior of financial variables often persists for several periods after such a change. While the regimes identified by regime switching models are...

Traditionally, “real” assets such as inflation-indexed bonds, commodities and real estate were thought to have correlate well with inflation and thus provide protection against rising price levels. But many of these assets turn out not to be that “real.” While a single real bond provides...