Annual Conference

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Investment Finance

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May 2014

Limited Attention, Marital Events, and Hedge Funds

Melvyn TEO, Sugata RAY, Yan LU
We explore the impact of limited attention by analyzing the performance of hedge fund managers who are distracted by marital events. We find that marriages and divorces are associated with significantly lower fund alpha, during the six-month period surrounding and the two-year period after the event...
Keywords: hedge funds, limited attention, Behavioral finance, disposition effect, Marriage, Divorce
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2014

When Real Estate is the Only Game in Town

Harrison HONG , Jeffrey P. THOMPSON, Hyun-Soo CHOI , Jeffrey D. KUBIK
Using data on household portfolios and mortgage originations, we find that households residing in a city with few publicly traded firms headquartered there are more likely to own an investment home nearby. Households in these areas are also less likely to own stocks. This only-game-in-town effect is...
Keywords: Real estate, homeownership, household portfolios, mortgage originations
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2014

Who are the Sentiment Traders? Evidence from the Cross-section of Stock Returns and Demand

Laura STARKS, Luke DEVAULT , Richard SIAS
Recent work suggests that sentiment traders shift from safer to more speculative stocks when sentiment increases. Given that the market clearing condition requires a buyer for every seller, we exploit these cross-sectional patterns and changes in share ownership to test whether investor sentiment me...
Keywords: Stock Returns, sentiment, demand shocks, mispricing
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AMPF Papers

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Commissioned Paper

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May 2014

Trilemmas and Tradeoffs: Living with Financial Globalization

Maurice OBSTFELD
This paper evaluates the capacity of emerging market economies (EMEs) to moderate the domestic impact of global financial and monetary forces through their own monetary policies. Those EMEs able to exploit a flexible exchange rate are far better positioned than those that devote monetary policy to f...
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Annual Conference

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Corporate Finance, Senior Fellows/Fellows

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May 2013

The Economics of Hedge Funds

Neng WANG, Jinqiang YANG, Yingcong LAN
Hedge fund managers trade off the benefits of leveraging on the alpha-generating strategy against the costs of inefficient fund liquidation. In contrast to the standard risk-seeking intuition, even with a constant-return-to-scale alpha-generating strategy, a risk-neutral manager becomes endogenously...
Keywords: high-water mark (HWM), alpha, management fees, incentive fees, liquidation risk, new money flow
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