Benjamin Franklin's original maxim found in Poor Richard's Almanac was actually "A penny saved is two pence clear" rather than the more commonly known "A penny saved is a penny earned." We believe he was getting at the notion that one risk-free penny is worth two pennies of expected but...

We show that motivated by sensation seeking, hedge fund managers who own powerful sports cars take on more investment risk but do not deliver higher returns, resulting in lower Sharpe ratios, information ratios, and alphas. Moreover, sensation-seeking managers trade more frequently, actively and...

In a world of low rates and high stock prices, it's natural many investors are looking for ways to earn a good return with limited exposure to equities. However, many candidate strategies have return distributions which are significantly different from the Normal and Log-normal distributions...

This paper introduces a return-based approach to studying a possible home bias of equity funds by estimating their exposures in their home countries. We first confirm the robustness of our approach using simulated portfolios with different proportions of domestic and foreign stocks. The...

We examine price impacts from dividend flows. Event study estimates show that stocks experience abnormal returns on the dividend distribution day. Results also show a spillover effect to non-dividend-paying stocks that are likely to be part of the same benchmark portfolio as the dividend-paying...

We document a novel channel through which coordinated trading exerts externalities on financial markets. We study the impact of a financial advisory firm that recommends frequent reallocations between equity and bond funds to Chilean pension investors. The recommendations generate large and...

Active investment management is crucially dependent on skill, i.e. the ability to deliver consistent outperformance. All types of unique investment skill form a space. Understanding a basis of this space helps build portfolios of active strategies. We propose one such basis by representing an...

Early in the 1950s, academics and investors started proposing in earnest a variety of summary statistics to capture in a single number the quality of an investment. Sharpe Ratio became the most commonly used, and it's an important metric, but maximizing Sharpe Ratio doesn't always maximize...

We develop conditional alpha performance measures that are consistent with conditional mean-variance analysis and the magnitude and sign of the implied true conditional time-varying alphas. The sequence of conditional alphas and betas is estimable from surprisingly simple unconditional...

Crises challenge client XVA management because the prices of derivatives contain the XVA hedges that the provider requires, as well as the functional hedge the client requires. By functional hedge we mean the hedge linked to the client's business, e.g. FX, inflation, interest rate. By XVA hedge...