We show that the currency risk embedded in the benchmarks of international mutual funds negatively affects fund performance. More specifically, a high benchmark-implied currency risk induces funds to invest in markets with less volatile currencies, leading to a higher degree of currency...

We examine the dynamic ownership structure of corporate bonds after initial issuance. We find that as bonds “season”, the market learns more about them. This learning leads to less concentrated bond ownership over time. Specifically, learning induces a shift in bond ownership from more...

We study how the presence of short sellers affects the incentives of the insiders to trade on negative information. We show it induces insiders to sell more (shares from their existing stakes) and trade faster to preempt the potential competition from short sellers. An experiment and...

We investigate an informal yet important mechanism in the private equity industry that helps to reduce uncertainty: relationship building. Based on a large sample of private equity funds over the 1980-2010 period, we find that the general partners strategically allocate good funds to loyal...

Firms in global markets often belong to business groups. We argue that this feature can have a profound influence on international asset pricing. In bad times, business groups may strategically reallocate risk across affiliated firms to protect core “central firms.” This strategic behavior...

We investigate the impact of the absence of short selling on the pricing of managerial skills in the mutual fund industry. In the presence of divergent opinions regarding managerial skills, fund managers can strategically use fees to attract only the most optimistic capital. The recognition of...