Performance of mutual fund selection methods is typically assessed using long samples (long time series). It is, however, very often of interest how well the methods perform in shorter samples. We carry out an extensive simulation study based on an empirically motivated skill distribution. For...

Following the financial crisis of 2008, it has been argued that Value at Risk (VaR), and risk analysis in general, failed to alert risk managers of the turbulence on the horizon. This is a misguided view that should not have come as a surprise because many widely circulated academic papers and...

We find asymptotically optimal trading policies for long-term investors with constant relative risk aversion, in a multiple-assets market where expected returns and covariances are constant, and the execution price of each asset is linear in the trading intensities of all assets. Trading towards...

Institutional investors, such as pensions and insurers, are typically constrained to hold enough wealth to be able to make their contractually promised payments to fund beneficiaries. This creates an additional risk in the economy, namely the risk of funding shortfall. We seek to explore the...

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...

For years, research has been conducted to correctly model and predict the risk and return structures of Private Equity (PE) funds. Although past research has revealed valuable insight into the features of those funds, most risk and return model struggle with the dispersion of PE funds' returns,...

This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives...

This paper examines the relation between idiosyncratic risk and mutual fund performance using asset pricing models. We use a unique data set containing monthly returns of 949 UK equity mutual funds over a 28-year period to measure fund performance. We find that idiosyncratic risk cannot be...

Funds that invest in illiquid assets report returns with spurious autocorrelation. Consequently, investors need to unsmooth returns when evaluating the risk exposures of these funds. We show that funds investing in similar assets have a common source of spurious autocorrelation, which is not...

Large-Scale Asset Purchases can impact the price of securities directly, when securities are targeted by the central bank, or indirectly through portfolio re-balancing of private investors. We quantify both the direct and the portfolio re-balancing impact, emphasizing the role of investor...