The average alpha of mutual funds is an indication of whether it pays off to invest in actively managed funds. In this study we show that a substantial part of the variation in the average alpha can be explained by exogenous factors. The most important factors are the average expense ratio, the...

This article compares the performance of systematic and discretionary hedge funds. In systematic funds, most trades are originated and executed by computer programs written for that purpose. In discretionary funds, human traders make decisions when to buy and sell which financial securities. The...

Dynamic Style Analysis is a returns-based style analysis using quantitative techniques to determine allocations that could have been made historically to one or more passive investment indices in order to replicate as close as possible the return stream of a fund over a selected time interval....

Mutual funds hold 32% of the U.S. equity market and comprise 58% of retirement savings, yet retail investors consistently make poor choices when selecting funds. Theory suggests that poor choices are partially due to mutual fund managers creating unnecessarily complex disclosures and fee...

This paper develops a diagnostic tool for candidate performance measures that accounts for investor disagreement in mutual funds. We compare the evaluation for best clienteles, specified by an upper admissible performance bound, to the one for representative investors implicit in twelve models....

Limited partnerships are attractive investment vehicles for investors because, as limited partners, investors cannot lose more than their invested capital despite the leverage of the partnership's portfolio. Consistent with this, the availability of tax losses to a limited partner is also more...

The Pension Protection Act of 2006 identified target-date funds as an appropriate default investment for defined contribution retirement plans. Using the 2009 National Financial Capability Study, this paper examines the relation between investor sophistication and the decision to primarily...

Using data on Spanish mutual funds, we show that bank-affiliated funds provide funding support to their parent company via purchases of bonds in the primary market. Funding from affiliated funds increases when it is most valuable, i.e., in times of financial stress and to riskier banks with...

A number of papers have demonstrated that over historical periods, a specified set of factors have outperformed actively managed funds. However, in almost all cases, the factors employed or the procedures followed are not replicable by tradable passive investments. In addition, tradable passive...

The strategy of simply holding stocks of high momentum, high trailing returns, is amazing for the amount of support that it has gotten from normally skeptical academics. But in practice there have been flies in the ointment. Unhedged pure momentum didn't help at all with the 2007--2008 Lehman...