This paper examines the implications for mutual fund performance measurement of two likely sources of specification error. We compare three well-known models, those of Jensen (1968), Treynor and Mazuy (1966), and Henriksson and Merton (1981), and two commonly-used timing benchmarks, the Samp;P...

We analyze a new class of linear factor models in which the factors are latent and the covariance matrix of excess returns follows a multivariate stochastic volatility process. We evaluate cross-sectional restrictions suggested by the APT, compare competing stochastic volatility specifications...

The analysis presented here uses simulated and real data sets to investigate the relative merits of parametric, semi- parametric and Bayesian methods in testing for the co-existence of plottage and plattage and in identifying the inflection point. Using artificial datasets generated with spatial...

In the G7 countries, the short-horizon performance of aggregate return predictors such as the dividend yield and the short rate appears nonexistent during business cycle expansions but sizable during contractions. This phenomenon appears related to countercyclical risk premiums as well as the...

We explore high-dimensional linear factor models in which the covariance matrix of excess asset returns follows a multivariate stochastic volatility process. We test crosssectional restrictions suggested by the arbitrage pricing theory, compare competing stochastic volatility specifications for...

Using a large sample of monthly gross flows from 1997 to 2003, we uncover several previously undocumented regularities in investor behavior. First, investor purchases and sales produce fund-level gross flows that are highly persistent. Persistence in fund flows dominates performance as a...