We analyze the out-of-sample performance of variables shown to forecast future mutual fund alphas. The degree of predictability, as measured by alpha spreads from quintile sorts or by cross-sectional regression slopes, falls by at least half post-sample. These declines appear to be primarily the...

We propose and test a methodological framework to examine the relation between mutual fund fees and return predictability. Gil-Bazo and Ruiz-Verdu (2009) drew attention to the puzzling fact that funds with worse before-fee performance charge higher fees. We make another contribution to the...

This study applies an innovative return-based approach to determine the style-shifting activity of mutual funds. Based on daily returns, we measure style-shifting activity as inter-quarterly changes in the style exposures of a fund. In order to test the robustness of style-shifting activity we...

A great deal of research effort has sought to understand whether fund managers have skill. However, most of this research draws inferences from fund returns attributable to funds that may have been managed by many different managers over the years. In this paper we focus on the fund manager. We...

This study introduces an innovative approach to measuring the “style-shifting activity” (SSA) of mutual funds using daily returns. Applying our new measure to a comprehensive sample of 2631 active US equity mutual funds, we show (i) that SSA predicts future performance, especially for...

Stock momentum, long-term reversal, and other past return characteristics that predict future returns also predict future realized betas, suggesting these characteristics capture time-varying risk compensation. We formalize this argument with a conditional factor pricing model. Using...

We compare the stock return forecasting performance of alternative payout yields. The net payout yield produces more accurate forecasts relative to alternatives, including the traditional dividend yield. This remains true even after excluding several years during the Great Depression when...

One of the most crucial decisions for investors and plan sponsors is the selection of funds among the thousands of available alternatives. We stress that an investor first needs to specify a target alpha, i.e., the expected fund return in excess of a benchmark, and that the target alpha...

We study how 9 different market participants trade with respect to 130 different stock return anomalies and how each participant's trades predict returns. Retail investors trade against anomalies, while firms' and short sellers' trades agree with anomalies. Institutional portfolios are weighted...

You're probably familiar, at least in passing, with the 'convexity' of long-term bonds - i.e. that yields dropping 1% produce a bigger price move than yields rising 1%. A significant amount of brainpower has gone into understanding all the ramifications of this convexity in the fixed income...