Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2022

Currency Management by International Fixed Income Mutual Funds

Clemens SIALM, Qifei ZHU
Investments in international fixed income securities are exposed to significant currency risks. We collect novel data on mutual fund currency derivatives and document that around 90% of U.S. international fixed income funds use currency forwards to manage their foreign exchange exposure. Funds’ cu...
Keywords: currency risk, forward contracts, mutual funds, fixed-income securities, performance
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Annual Conference

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Investment Finance

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May 2022

Financial intermediaries and contagion in market efficiency: The case of ETFs

Frank Weikai LI, Claire Yurong HONG, Avanidhar SUBRAHMANYAM
Capital constraints of financial intermediaries can affect liquidity provision. We investigate whether these constraints spillover and consequently cause contagion in the degree of market efficiency across assets managed by a common intermediary. Specifically, we provide evidence of strong comovemen...
Keywords: ETFs, financial intermediaries, capital constraints
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2022

The Performance of Characteristic-Sorted Portfolios: Evaluating the Past and Predicting the Future

Sheridan TITMAN, Aydogan ALTI, Travis L. JOHNSON
The expected returns of most portfolios are likely to fluctuate over time. We present a statistical model that allows for such fluctuations and apply the model to analyze the returns of characteristic-sorted portfolios, such as value minus growth. We find that accounting for plausible magnitudes of ...
Keywords: Portfolio returns, time-variation, autocorrelation, standard errors, return predictability, Bayesian
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2022

Inflation Expectations and Portfolio Rebalancing of Households: Evidence from Inflation Targeting in India

Sumit AGARWAL, Pulak GHOSH, Changcheng SONG, Yeow Hwee CHUA
This paper exploits a natural experiment in India – Inflation Targeting to study how changes in inflation expectations influence households’ consumption, savings, and investments in risky assets. Using regional heterogeneity in inflation expectations by city and city-age-gender bins due to the I...
Keywords: Expectations, Inflation Targeting, Household Finance, Household Balance Sheet, Consumption, Savings,
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Annual Conference

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Investment Finance

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May 2022

Getting to the Core: Inflation Risks Within and Across Asset Classes

Xiang FANG, Yang LIU, Nikolai ROUSSANOV
Decomposing inflation into core and non-core components (e.g., energy) sheds new light on the nature of inflation risk and risk premia. While stocks have insignificant exposures to headline inflation in the U.S., their core inflation betas are negative while energy betas are positive. Conventional i...
Keywords: Inflation Risks, Core inflation, Cross-section of asset returns
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