I study the market for lending and borrowing securities in the United States. I find that by making securities available for borrowing, mutual funds acquire information about short selling, which they exploit for trading. Funds with discretion in their investment choices rebalance their...

Using microdata on stock-level lending positions from German mutual funds, we show that active funds use the equity lending market to obtain information about short sale demand. Funds reduce long positions in response to these demand signals, which allows fund managers to front-run public...

We use price pressure resulting from purchases by mutual funds with large capital inflows to identify overvalued equity. This is a relatively exogenous overvaluation indicator as it is associated with who is buying, buyers with excess liquidity, rather than what is being purchased. We document...

Deleveraging risk is the risk attributable to investing in a security held by levered investors. When there is an aggregate negative shock to the availability of funding capital, securities with a greater presence of levered investors experience extreme return realizations as these investors...

The popularity of passive investing through index mutual funds and exchange-traded funds (ETFs) has grown substantially over recent years, displacing higher-cost active investment styles. A shift towards passive investing could affect securities markets in two key ways. First, it could result in...

We document economically large momentum profits when sorting ETFs on returns over the past two to four years. A value-weighted, long-short strategy based on ETF momentum delivers Carhart (1997) four-factor alphas of up to 1.20% per month. Neither cross-sectional stock momentum nor co-variation...

Passive investing, particularly in emerging markets, has become an increasingly popular means of quick, “diversified” exposure to a particular segment of the markets. Defensive investors, as Benjamin Graham noted, would be best served owning a diversified list of leading companies. Yet it's...

ETFs attract a larger proportion of institutional investors than do the underlying markets. The price of an ETF will deviate from the price of the underlying, if institutional investors are less prone to investor sentiment-driven mispricing, than are retail investors. We employ a unique...

Short sellers are perceived as informed, sophisticated investors. Yet little is known about their actual performance and trading strategies. Using a novel, hand-collected data set of daily position disclosures in Europe, we identify the entry, change, and exit dates of large short-sale positions...

Fund managers can only exhibit selectivity through purchasing (selling) stocks that appreciate (depreciate) more frequently than expected from random occurrence, if stocks are incorrectly priced. We develop a method that can statistically identify fund managers that exhibit net, buy, and sell...