We introduce a decomposition showing precisely how actively-managed portfolio returns can be separated into three measurable components that we call Opportunity, Foresight, and Active Management Risk. Opportunity reflects the degree to which the investment opportunity set contains exploitable...

This article analyzes the manifold situations in which the efficient-market hypothesis (EMH) has influenced — or has failed to influence — federal securities regulation and state corporate law, and the prospective roles for the EMH in these contexts. In federal securities regulation, the EMH...

This paper proposes and tests an investment-flow based explanation for three empirical findings about return predictability -- the persistence of mutual fund performance, the "smart money" effect, and stock price momentum. Motivated by prior studies, I construct a measure of demand shocks to...

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...

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...

We provide evidence that institutions place lower trading priority and delay their trading in small, illiquid stocks. The slow trading of small stocks in turn delays the adjustment of small stock prices. In contrast, for large, liquid stocks, institutions demand immediacy, which generates some...

This paper provides evidence of the impact of hedge funds on asset markets. We construct a simple measure of the aggregate illiquidity of hedge fund portfolios, based on the cross-sectional average first order autocorrelation coefficient of hedge fund returns, and show that it has strong and...

I document a new stylized fact: the higher the degree of institutional ownership (IO) in a portfolio, the more time-varying expected returns rather than changes in expected dividend growth drive changes in its valuation. Empirical evidence suggests that institutions' time-varying sensitivity to...

Final working paper version. "" Published version: The Review of Financial Studies, Volume 31, Issue 7, July 2018, pp. 2499–2552. Past fund performance does a poor job of predicting future outcomes. The reason is noise. Using a random effects framework, we reduce the noise by pooling...

I investigate the importance of local demand shocks on excess comovements and return predictability for 4560 twin-pairs of Exchange-Traded Funds (ETFs) from 15 country-pairs. The returns on ETFs traded in the same country comove excessively with one another. These comovements are stronger for...