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Flow-Based Asset Pricing: Maximum Price Impact Ratio

We analyze the flow-driven fluctuations of the cross section of asset prices. We take the stance that price impacts of uninformative flows arise as marginal investors' risk compensation. We show that shorting the portfolio that incurs the maximum …

Factor Demand and Factor Returns

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 …