Utility functions offer a means to encode objectives and preferences in investor portfolios. The functions allow one to place a score on outcomes and then identify optimal portfolios by maximizing utility. The central theme of this article is that utility functions should be tailored to the...

This paper investigates how the nature of risk changes as investment horizon lengthens, and what it means for investors. Accumulated wealth is analyzed in terms of four drivers: expected return, cash flow innovations, discount rate innovations, and reinvestment rates. This perspective highlights...

We study the equilibrium implications of a multi-asset economy in which asset managers are subject to different benchmarks, and demonstrate how heterogeneous benchmarking generates a mechanism through which fundamental shocks propagate across assets. Fluctuations in asset managers' capital...

We use a novel sample of exchange-traded security baskets managed by users of an online platform to provide new evidence on the risk-taking behavior of portfolio managers under option-like incentives. The unique feature of our setting is that it combines explicit-ly convex incentives with...

I present a model where competition in the asset management industry has positive and negative effects on fund performance. When funds have increasing (decreasing) returns to scale at the industry level, the flow-performance relation is concave (convex). Active funds outperform their benchmark...

A well established believe in the pension industry is that collective pension funds should take more stock market risk (compared to individual retirement accounts) since risk may be shared with future generations. We extend the OLG model of Gollier (2008) by adding labor income risk in the...

We explore a new dimension of the dependence of hedge fund returns with the market portfolio by examining linear correlation and tail dependence conditional on the financial cycle. Using a large sample of hedge funds that are considered "market neutral", we document that the low correlation of...

In asset management, the portfolio leverage affects performance, and can be subject to constraints and operational limitations. Due to the possible leverage aversion of the investors, the comparison between portfolio performances can be incomplete or misleading. We propose a procedure to...