The sensitivity of long-term rates to short-term rates represents a puzzle for standard macro-finance models. Post-FOMC announcement drift in Treasury markets after Federal Funds target changes contributes to the excess sensitivity of long rates. Mutual fund investors respond to the salience of...

When long-term investors trade slowly changing portfolios, they are not particularly sensitive to when they should place or modify their bets. Short-term information can be used to guide investors on how to time their trades. Strategic trade modification provides exposure to short-term signals...