Academics and regulators posit that mutual funds that engage in significant liquidity transformation can be systemically risky because investors in these funds redeem at the fund's net-asset-value and compete for a common fund liquidity pool. An alternative, more general explanation is that all...

Beta-sorted portfolios—portfolios comprised of assets with similar covariation to selected risk factors—are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little is known of their statistical properties in contrast to...

We develop a dynamic general-equilibrium framework with multiple households and multiple risky assets to explain how less- and more-sophisticated households differ in their portfolio and wealth dynamics. Differences in sophistication are modeled via heterogeneous confidence about asset returns,...