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Cross-Sectional Asset Prices under the Impact of Noise Trading Flows: A Factor Framework

We propose that noise trading flows impact cross-sectional asset prices through systematic risk factors. In our model, asset-level flows, when aggregated at the factor level, drive fluctuations in factor prices and risk premiums. These factor- level …

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 …