This paper examines how the rise of passive investing affects active management. I develop a parsimonious model of passive and active investment in which greater passive investment accelerates investors' learning about active managers' skill. The model provides a rational explanation, namely the...

Hedge funds significantly reduced their equity holdings during the recent financial crisis. In 2008Q3-Q4, hedge funds sold about 29% of their aggregate portfolio. Redemptions and margin calls were the primary drivers of selloffs. Consistent with forced deleveraging, the selloffs took place in...

This study assesses the effect of fund-level and systemic factors on the performance of mutual funds in the context of changing market conditions. A Markov regime-switching model is used to analyze the performance of 33 South African equity mutual funds from 2006 to 2019. From the results, fund...

We test the hypothesis that low visibility shocks to text-based network industry peers can explain industry momentum. We consider industry peer firms identified through 10-K product text and focus on economic peer links that do not share common SIC codes. Shocks to less visible peers generate...

We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on informational efficiency, liquidity and volatility. In our sequential trading model there are price elastic noise traders and traders with private information of heterogeneous quality. We estimate the...

We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on financial market outcomes. In our sequential trading model, there are price-elastic noise and informed traders. We estimate the model through maximum likelihood for a sample of sixty New York Stock...

The battle between proponents of the Efficient Markets Hypothesis and champions of behavioral finance has never been more pitched, and little consensus exists as to which side is winning or the implications for investment management and consulting. In this article, I review the case for and...

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

A decent budgetary portfolio is nothing more, and nothing less, than an accumulation of advantages that develop in quality and produce abundance money for the financial specialist to spend or reinvest. Markowitz (1959) is one of the pioneers of present day portfolio hypothesis. Generally, the...

We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more...