In Merton (1987), idiosyncratic risk is priced in equilibrium as a consequence of incomplete diversification. We modify his model to allow the degree of diversification to vary with average idiosyncratic volatility. This simple recognition results in a state‐dependent...

Cusatis, Miles, and Woolridge (1993) report large positive excess returns following spin-offs over the period 1965-88. We investigate whether a trading strategy based on this ex post analysis would have earned excess returns on an ex ante basis over the period 1989-95. When compared with the...

Barberis and Shleifer (2003) argue that style investing generates momentum and reversals in style and individual asset returns, as well as comovement between individual assets and their styles. Consistent with these predictions, in some specifications, past style returns help explain future...

We examine the impact of the entry of new mutual funds on incumbents using the overlap in their portfolio holdings as a measure of competitive intensity. This simple metric delivers powerful economic results. Incumbents that have a high overlap with entrants subsequently engage in price...