We link a seemingly biased trading behavior to equilibrium asset prices. U.S. equity mutual fund managers tend to sell both their big winners and big losers. This selling pressure pushes down current prices and leads to higher future returns; aggregating across funds, we nd that securities for...

I study the determinants of mutual fund managers' expectations about the stock market and its implications for decision making and fund performance. Using a direct measure of managers' market expectations extracted from mutual funds' semi-annual reports, I find that fund managers extrapolate...

I study how mutual funds invest in public U.S. firms where founding family members retain a significant portion of shares. I posit that informed funds exploit the opaque nature of family firms by holding large positions when they have good private signals about the firms. By studying actively...

The on-going debate over whether fund managers have skills and whether those skills are short-lived is still inconclusive. Using the performance measure that can't be manipulated with respect to the underlying distribution, time variation, nor estimation error, (the manipulation-proof...

Lending to emerging market economies (EMEs) through bond purchases has surged since 2009. What are the risks of a sudden stop? Bond mutual funds may curtail credit through two channels. The first is redemptions by ultimate investors. The second is additional discretionary sales by fund managers,...

In this paper, I examine the flow and performance of mutual funds in Brazil and their portfolio allocations during the global financial crisis. First, I show that mutual funds exposed to deposits and securities issued by small banks suffered significant outflows, due to the increased risk...

Active fee is the ratio between the excess cost of active management over the index alternative and the fund's activity level. We suggest a simple model that explains active capital allocations in the presence of time-varying active fee. We show that investors respond in accordance with the...

We identify fixed-income mutual funds as an important contributor to the unusually high selling pressure in liquid asset markets during the Covid-19 crisis. We show that mutual fund liquidity transformation led to pronounced investor outflows. In meeting redemptions, funds followed a pecking...

Identifying outperforming mutual funds ex-ante is a notoriously difficult task. We use machine learning to exploit fund characteristics and construct portfolios of equity funds that earn positive and significant out-of-sample alpha net of all costs. In contrast, alphas of portfolios selected...

This paper examines the role conviction plays in asset management and its relationship with investment returns. We measure the strength of fund manager conviction through a fund’s Active Share, i.e., the extent to which an investment portfolio differs from its benchmark index. First, we show...