Purpose – The purpose of this study is to examine the market-timing ability of mutual fund flows and how fund investors conduct asset allocation in response to market volatility. Design/methodology/approach – The paper compares the abnormal returns of net inflow funds with those of net...

Unconditional alphas are biased when conditional beta covaries with the market risk premium (market timing) or volatility (volatility timing). We demonstrate an additional bias (overconditioning) that can occur any time an empiricist estimates risk using information, such as a realized beta,...

This paper explores the question of whether hedge funds engage in front-running strategies that exploit the predictable trades of others. One potential opportunity for front-running arises when distressed mutual funds -- those suffering large outflows of assets under management -- are forced to...

We analyze institutional investors' preferences for stocks and the implications that these preferences have for stock-market prices and returns. We find that -- a category including all managers with greater than $100 million under discretionary control -- have nearly doubled their share of the...

Financial markets are increasingly fragmented. How to supply liquidity in this environment? Using an inventory model, we analyze how two strategic intermediaries compete across two venues that can be hit simultaneously by liquidity shocks of equal or opposite signs. Although order flow is...

This paper shows how the reaction of selected emerging CEE currencies to increased uncertainty depends on market sentiment in a core advanced economy or even on the global scale. On the example of the Czech koruna, a highly stylized model of portfolio allocation between EUR- and CZK-denominated...

Repo is used in India as an instrument for monetary policy by institutionalizing daily Liquidity Adjustment Facility (LAF) which allows banks and Primary Dealers to manage their liquidity needs. Liquidity stress in the market has an impact on the short term interest rate. Entities not having...

The financial crisis that began in 2007 is especially a crisis in debt markets. A full understanding of what happened in the financial crisis requires investigation into the plumbing of debt markets. During a financial crisis, when funds often cannot be raised easily or quickly, the fundamental...