We address three questions relating to the interest rate options market: What is the shape of the smile? What are the economic determinants of the shape of the smile? Do these determinants have predictive power for the future shape of the smile and vice versa? We investigate these issues using...

Margin capacity, defined as the aggregate excess debt capacity of investors buying securities on margin, strongly predicts (a) lower S&P 500 returns, (b) lower growth in aggregate earnings, dividends, employment, and overall economic activity, (c) higher macro, financial, and policy uncertainty,...

Using a comprehensive dataset of orders and trades in the Indian government bond market, this study presents new evidence on the effect of funding liquidity on market liquidity. Consistent with models that stress intermediary capital, we find that market liquidity has a strong, positive...

Using a unique data set of trades and limit orders for Samp;P 500 futures, we decompose the aggregate risk into a component driven by the impact of net market orders and a component unrelated to net orders. The first component -- flow-driven risk -- is large, accounting for approximately 50...

Does the mutual fund industry lose its best managers to hedge funds? We find that mutual funds are able to retain managers with good performance in the face of competition from a growing hedge fund industry. On the other hand, poor performers are more likely to leave the mutual fund industry. A...

We address three questions relating to the interest rate options market: What is the shape of the smile? What are the economic determinants of the shape of the smile? Do these determinants have predictive power for the future shape of the smile and vice versa? We investigate these issues using...

Does the mutual fund industry lose its best managers to hedge funds? We find that mutual funds are able to retain managers with good performance in the face of competition from a growing hedge fund industry. On the other hand, poor performers are more likely to leave the mutual fund industry. A...