This paper studies the level, determinants, and implications of the factor timing ability of hedge fund managers. We find that approximately 30% of hedge funds display factor timing ability on at least one factor, concentrated especially at the market, size, and bond factors. Better factor...

We link a seemingly biased trading behavior to equilibrium asset prices. U.S. equity mutual fund managers tend to sell both their big winners and big losers. This selling pressure pushes down current prices and leads to higher future returns; aggregating across funds, we nd that securities for...

I present closed-form analytical solutions to the active mean-variance portfolio management problem relative to a pre-specified benchmark subject to a budget constraint and a beta constraint. The imposition of the beta constraint makes the benchmark relevant to the portfolio problem. I provide...

This paper studies the information content of a subtle writing style, the expression of confidence. We use unsupervised machine learning to generate new lexicons for three aspects of a writer's level of confidence in expressing opinions: certainty, intensity of expression, and emotional...

The paper builds on a simple yet novel idea that the way investors react to the recent mutual fund performance depends largely upon the long-term historical performance of that fund. In particular, I find that investors react more actively to the fund's recent performance in case of the funds...

We analyse the differences between the optimal portfolio of funds that a fully in-formed investor might select and the current structure of the mutual fund markets as characterized by the funds' risk profile (conservative or aggressive) and target investor type (retail or wholesale). We find...

Whereas risk tolerance is an important parameter of financial intermediation in markets for mutual funds, formal theoretical predictions show funds managers' choices of portfolio risk tolerances can be induced in entirety by wealth considerations. An important implication of this finding is the...

Limited partnerships are attractive investment vehicles for investors because, as limited partners, investors cannot lose more than their invested capital despite the leverage of the partnership's portfolio. Consistent with this, the availability of tax losses to a limited partner is also more...

This paper considers passive fund selection from an individual investor's perspective. The growth of the passive fund market over the past decade is staggering. Individual investors who wish to buy these funds for their retirement and brokerage accounts have many options and are faced with a...

Given an investment universe, we consider the vector ρ(w) of correlations of all assets to a portfolio with weights w. This vector offers a representation equivalent to w and leads to the notion of ρ-presentative portfolio, that has a positive correlation, or exposure, to all assets. This...