Berk and Green (2004) argue that investment inflow at high-performing mutual funds eliminates return persistence because fund managers face diminishing returns to scale. Our study examines the role of trading costs as a source of diseconomies of scale for mutual funds. We estimate annual trading...

Regulations allow market makers to short sell without borrowing stock, and the transactions of a major options market maker show that in most hard-to-borrow situations, it chooses not to borrow and instead fails to deliver stock to its buyers. Some of the value of failing passes through to...

This study provides empirical evidence on the role of disclosure in resolving agency conflicts in delegated investment management. For certain expenditures fund managers have alternative means of payment which differ greatly in their opacity: payments can be expensed (relatively transparent); or...

Retail investors often lack investment expertise. Mutual-fund brokers can help, but their incentives are mixed so it is an empirical question what value they add, both for consumers and for fund families. Investors pay more to invest through unaffiliated brokers than captive brokers, and while...

Prior research suggests that ETF arbitrage affects the market quality of underlying securities. We directly test this proposition by examining minute-by-minute returns and order imbalances, but find little evidence that trading in ETFs impacts the underlying. Panel vector autoregression shows...

We examine the role of peer (e.g., Lipper indices) vs. pure (i.e., market indices) benchmarks in the compensation contract of mutual fund managers. We first model the impact of peer vs. pure benchmarks on fund manager incentives. Then, using a unique hand-collected dataset, we test the...

Short-selling and liquidity provision in Exchange-Traded Funds creates ETF shares with cash flows rights but no associated voting rights. These "phantom shares" trade at ETF market prices, but, because they are not backed by the underlying basket of securities held by the ETF sponsor's custodian...

Using manager compensation disclosure and intra-family manager cooperation measures, we create indices of family-level competitive/cooperative incentives. Families that encourage cooperation among their managers are more likely to engage in coordinated behavior (e.g., cross-trading,...