Momentum profits can be explained by exposure to risks omitted from common factor models (distress risk, idiosyncratic risk, and covariance with corporate bonds) and underreaction to innovations in these risks. Momentum strategies tend to go long risky stocks with high expected returns....

We find that a large portion of U.S. equity mutual funds almost second-order stochastically dominates the market portfolio. Consistent with the canonical definition of second-order stochastic dominance, both fund investors and managers reveal their preference for funds with a higher degree of...

We provide evidence regarding mutual funds' motivation to hold lottery stocks. Funds with higher managerial ownership invest less in lottery stocks, suggesting that managers themselves do not prefer such stocks. The evidence instead supports that managers cater to fund investors' preference for...

Stocks with increases in idiosyncratic risk tend to earn low subsequent returns for a few months. However, high idiosyncratic risk stocks eventually earn persistently high returns. These results are consistent with positively priced idiosyncratic risk and temporary underreaction to idiosyncratic...

We provide evidence regarding mutual funds' motivation to hold lottery stocks. Funds with higher managerial ownership invest less in lottery stocks, suggesting that managers themselves do not prefer such stocks. The evidence instead supports that managers cater to fund investors' preference for...