Agency mortgage-backed securities trade simultaneously in a market for specified pools (SPs) and in the to-be-announced (TBA) forward market. TBA trading creates liquidity by allowing thousands of different MBS to be traded in a handful of TBA contracts. SPs that are eligible to be traded as...

We find hedge funds that have higher return covariation with a disaster concern index, which we construct using out-of-the-money puts on sector indices, earn significantly higher returns. These funds have better skills in exploiting the market's ex ante rare disaster concerns (SED) that are not...