We study liquidity provision by dealers in a dynamic model of asset markets. When economic fundamentals are high (low), dealers provide more (less) liquidity by holding more (less) inventory, the market is liquid (illiquid), and interdealer trading is active (inactive). When fundamentals are...

We find that news-based measures of economic policy uncertainty (EPU) negatively forecast momentum. A one standard deviation increase in EPU is associated with a 1.11% decrease in risk-adjusted momentum returns. The predictive power of EPU is robust after controlling for previously documented...

This paper explores the idea that investors ex ante price the risk that large fire sales by liquidity-shocked blockholders will trigger negative price impacts, referred to as "fragility risk," and argues that fragility risk should be lower for institutional blockholders who can credibly signal...

In this study, we examine how banks' stock price crash risk is affected by recourse uncertainty embedded in securitizations. By recourse uncertainty, we mean the difficulty for equity market participants to assess the true extent of risk transfer between securitizing banks and investors in...

We propose the bear beta, i.e. the sensitivity of hedge funds to a bear spread portfolio orthogonalized to the market, as a novel way of classifying funds as insurance buyers or sellers. We find that low bear beta funds (insurance sellers) outperform high bear beta funds (insurance buyers) by...

The use of leverage is often considered a key potential systemic risk in hedge funds. Yet, data limitations have made empirical analyses of hedge fund leverage difficult. Traditional theories predict leverage and portfolio risk are positively linearly related. Alternatively, an emerging wave of...

We measure a stock's exposure to fire sale risk through its ownership links to equity mutual funds that experience outflows during periods of systematic outflows from the fund industry. We find that more exposed stocks earn higher average returns: a portfolio that buys (shorts) stocks with the...

These days it's become convention (reinforced by the media's treatment of wealth) to assess our net worth by tallying up the market value of our financial assets, even though it's more natural and useful to think of our wealth as a stream of dollars over time given the nature of our income and...

We give an explicit algorithm and source code for constructing risk models based on machine learning techniques. The resultant covariance matrices are not factor models. Based on empirical backtests, we compare the performance of these machine learning risk models to other constructions,...

This article reviews empirical methods to assess risk and return in private equity. I discuss data and econometric issues for deal-level, fund-level, and publicly traded partnerships data. Risk-adjusted return estimates vary substantially by method, time period, and data source. The weight of...