We study the puzzle of portfolio underdiversification and proximity investment from a novel perspective, linking it to the process of urbanism. We find that urban portfolios are more focused - i.e., less diversified and more concentrated in quot;closequot; stocks - than urban portfolios. We...

This paper analyzes the implications of cross-sectional hetero- skedasticity in repeat sales regression (RSR). RSR estimators are essentially geometric averages of individual asset returns because of the logarithmic transformation of price relatives. We show that the cross sectional variance of...

Using a sample of daily net flows to nearly 1,000 U.S. mutual funds over a year and a half period, we identify a set of systematic factors that explain a significant amount of the variation in flows. This suggests the existence of a common component to mutual fund investor behavior and indicates...

We use a two-year panel of individual accounts in an Samp;P 500 index mutual fund to examine the trading and investment behavior of more than 91 thousand investors who have chosen a low-cost, passively managed vehicle for savings. This allows us to characterize investors' heterogeneity in terms...

Our analysis of daily index fund flows indicates a strong contemporaneous correlation between fund inflows and Samp;P market returns. We also document a strong negative correlation between fund out flows and Samp;P market returns with the exception of outflows from a back-end load fund. These...

The expected return on equity capital is possibly the most important driving factor in asset allocation decisions. Yet, the long-term estimates we typically use are derived from U.S. data only. There are reasons to suspect, however, that these estimates of return on capital are subject to...

Recent research shows that emerging markets are distinguished by high returns and low covariances with global market factors. These are striking results, because of their immediate implications for the international investor. One key issue is whether these results may be attributed to selection...

The series of events in 1720 called the Mississippi Bubble, South Sea Bubble and the Dutch Windhandel represent the first and by some measures the largest global financial bubble in history. Stock prices of more than 50 companies rose by 100% to 800% in less than a year and then lost nearly all...

In this paper, we estimate the behavioral component of the Grinblatt and Han (2002) model and derive several testable implications about the expected relationship between the preponderance of disposition - prone investors in a market and volume, volatility and stock returns. To do this, we use a...

We test a Wall Street investment strategy, quot;pairs trading,quot; with daily data over 1962-2002. Stocks are matched into pairs with minimum distance between normalized historical prices. A simple trading rule yields average annualized excess returns of up to 11% for self-financing portfolios...