Following recent evidence of out-of-sample stock market return predictability, the authors aim to evaluate whether the potential benefits suggested by asset allocation theory can actually be captured in the real world using expected return estimates from a predictive system. The question is...

Following recent evidence of out-of-sample stock market return predictability, the authors aim to evaluate whether the potential benefits suggested by asset allocation theory can actually be captured in the real world using expected return estimates from a predictive system. The question is...

We present a two-factor volatility model to study the impact of news arrival and trading volume on stock returns variance. The model can explicitly account for the association between volatility and volume, as well as the persistence in equity variance. Unlike the standard "Mixture of...

The Exchange Traded Fund market is growing, and passive investors need to have reasonable grounds for choosing this investment vehicle as well as robust selection criteria. The author motivates the assertion that a tracker performance must be assessed relative to its benchmark index and not be...

We study product differentiation in the mutual fund industry. We design a model in which funds with heterogeneous perceived quality can choose their level of product differentiation. In equilibrium, high quality funds choose broad market designs (i.e., low differentiation) appealing to many...

If capital won't come to fund managers, fund managers will go to capital. I document that fund managers move across mutual fund firms to manage amounts of capital that better match their skill, which improves the allocative efficiency of capital across fund managers. For causal identification, I...

We analyze optimal investment strategies under the drawdown constraint that the wealth process never falls below a fixed fraction of its running maximum. We derive optimal allocation programs by solving numerically the Hamilton-Jacobi-Bellman equation that characterizes the finite horizon...

We ask how the ESG performance of firms affects the asset allocation of a large sample of French employees between their employer’s stock and alternative investments in firm-sponsored savings plans. After ESG incidents, employees are less likely to invest and they invest smaller amounts in...