xs

A Factor Framework for Cross-Sectional Price Impacts

We propose a framework in which noise trading flows impact cross-sectional asset prices through risk factors. In the model, asset-level flows, when aggregated at the factor level, drive fluctuations in factor risk premia. The factors' price impacts …

Factor Rebalancing

We propose a novel source of predictable price pressure resulting from mutual funds’ factor rebalancing behavior. When a fund’s factor demand is persistent, it needs to rebalance the portfolio’s factor exposure, leading to predictable trading at the …

Delegation Uncertainty

Delegation bears an intrinsic form of uncertainty. Investors hire managers for their superior models of asset markets, but delegation outcome is uncertain precisely because managers' model is unknown to investors. We model investors' delegation …