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Flow-Based Asset Pricing

In any market with uninformative flows, the maximum Sharpe-ratio portfolio can be separated into two. The first portfolio uses only fundamental information to maximize the Sharpe ratio. The second portfolio provides liquidity to uninformative flows …

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 …