Movements in prices depend both on innovations to cashflows and changes in discount rates, which can be modelled as fluctuations in the cross-sectional distribution of wealth across an unchanging set of investment objectives. This paper explores the risk that arises when investors do not have...

Investors are periodically challenged with this question: with funds ready to invest, but faced with a market that is generally perceived to be expensive, is it better to wait for a market correction before investing? Many investors are certain that a correction must be around the corner, and...

We develop a model in which financially constrained arbitrageurs exploit price discrepancies across segmented markets. We show that the dynamics of arbitrage capital are self-correcting: following a shock that depletes capital, returns increase, and this allows capital to be gradually...

As we noted in Grover and Kizer [2016], the proliferation of style (or factor) investing has created a more complicated landscape for investors. It can be difficult for investors and their advisors to understand what style exposures a particular fund or strategy provides, whether the net expense...

We introduce the notion of a patience premium, which is based on the concept of ambiguity aversion and is an ambiguity premium. We identify three reasons for the existence of the patience premium: Certainty preferences: perceived confidence in the expected performance; Comparison with peers:...

The on-going debate over whether fund managers have skills and whether those skills are short-lived is still inconclusive. Using the performance measure that can't be manipulated with respect to the underlying distribution, time variation, nor estimation error, (the manipulation-proof...

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 take a deeper look at the robustness of evidence presented by Pastor, Stambaugh, and Taylor (2015) and Zhu (2018), who find that an actively managed mutual fund's returns relate negatively to both fund size and the size of the active mutual fund industry. When we apply robust regression...

We propose an improved formulation for the widely used active share metric. The new definition is derived analytically and then tested by empirical analysis. We explain why the active share metric, in its current form, gives ambiguous results. The improved formulation is consistent across...