Assets invested in passively managed equity mutual funds and exchange traded funds (ETFs) have grown steadily in recent years, reaching more than one trillion dollars at the end of 2010. Through a battery of tests, we establish that the rise in popularity of index investing contributes to higher...

The authors found that the rise in popularity of index trading — assets invested in index funds reached more than $1 trillion at the end of 2010 — contributes to higher systematic equity market risk. More equity index trading corresponds to increased cross-sectional trading commonality,...

Using idiosyncratic volatility as a proxy for arbitrage costs, the authors found that the highly publicized accrual and asset growth anomalies exist because of high barriers to arbitrage, occurring predominantly in the universe of stocks with higher arbitrage risks. Therefore, investors who seek...

Using a comprehensive sample of investment recommendations, we investigate differences in the performance, behavior, and career outcomes of male and female sell-side analysts. Compared to their male counterparts, we find that the recommendations of female analysts produce similar abnormal...

We show that over a long study period (1963-2010), the existence and trading efficacy of the well-known low-volatility stock anomaly are more limited than widely believed. For example, we find that the anomalous returns are not found within equal weighted long-short (low minus high risk)...

We propose a unique dynamic portfolio construction framework that improves portfolio performance by adjusting asset allocation in accordance with a forecast of market risk. We find that modifying asset allocation according to our market risk barometer offers investors the promising opportunity...

Extreme market movements, especially in recent years, prompt our efforts to better understand the complexities of market dynamics. This paper seeks a better understanding of the features that characterize market environments through time. Specifically, we first demonstrate how market distress...

Active quantitative portfolio management is on the verge of change, we believe towards a more flexible approach capable of capturing dynamics in risk and return expectations across an array of asset classes. The static quant-driven approach to active management in widespread use today is...

Asset price bubbles build and burst today much as they have since modern capital markets first evolved some 300 years ago. In recent decades, although the real economy has become less volatile, the financial markets have not. They remain volatile and unpredictable. Exploring the driving forces...

The asset allocation decision is arguably the most important decision in the investment process. It involves allocating an investor's portfolio among a set of desirable asset classes, but the investor must first define the asset classes to consider. The concept of investment-consumption value...