We use unique institutional securities holdings data to examine the trading behaviour of delegated institutional capital and its impact on bond risk premia. We show that institutional fund managers trade strongly procyclically: they actively move into higher yielding, longer duration and lower...

Institutional funds have concentrated ownership by a few institutional investors, infrequent outflows and essentially no leverage. Yet using unique granular data on the bond holdings of institutional funds, we show that their trading behavior is strongly procyclical: they actively move into...

We test the role of funding-constrained investors across developed financial markets. We compile direct measures of the severity of funding frictions, or illiquidity, from deviations of government bond yields from a fitted yield curve. Using these illiquidity measures, we first show that higher...

In their seminal paper on bond fund performance, Blake, Elton and Gruber (1993) state that survivorship bias is unimportant for this market segment. Many bond fund studies have since been published without treating survivorship bias despite the dramatic changes in the market over the last 20...

This study analyzes the motives for and consequences of funds' credit default swap (CDS) investments using mutual funds' quarterly holdings from pre- to post-financial crisis. Funds resort to CDS investment when facing unpredictable liquidity needs. Funds sell more in reference entities where...

We show that international equity mutual funds underweight equity markets with risky currencies and overweight equity markets with less risky ones. This risk-management practice is an important determinant for allocations among foreign equities and can also help explain levels of home bias for...

This paper provides a new explanation for closed-end fund (CEF) discounts and premiums using the local martingale theory of asset price bubbles. This is a rational asset pricing model that is shown to be consistent with the existing empirical evidence on CEF discounts/premiums. Additional...

We identify a component of monetary policy news that is extracted from high-frequency changes in risky asset prices. These surprises, which we call "risk shifts", are uncorrelated, and therefore complementary, to risk-free rate surprises. We show that (i) risk shifts capture the lion's share of...

This paper proposes a theory of the equilibrium liquidity premia of private equity funds and explores its asset-pricing implications. The theory is based on the notion that investors are exposed to the risk of facing surprise liquidity shocks, which upon arrival force them to liquidate their...

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...