We show that the level of interest rates determines the magnitude of mispricing at the turn of the tax year, as investors face the trade-o¤ between selling a temporarily depressed stock this year and selling next year, but delaying tax implications by one year. Interest rates do explain the...

By connecting stocks through common active mutual fund ownership, we forecast cross-sectional variation in return covariance, controlling for similarity in style (industry, size, value, and momentum), the extent of common analyst coverage, andother pair characteristics. We argue this covariance...

We propose a novel measure of arbitrage activity to examine whether arbitrageurs can have a destabilizing e¤ect in the stock market. We apply our insight to stock price mo- mentum, a classic example of an unanchored strategy that exhibits positive feedback since arbitrageurs buy stocks when...

In the presence of overlapping generations, markets are incomplete because it is impossible to engage in risksharing trades with the unborn. In such an environment the government can use a social security system, with contingent taxes and benefits, to improve risksharing across generations. An...