We investigate the impact on firms of joining the S&P 500 index from 1997 to 2017. We find that the positive announcement effect on the stock price of index inclusion has disappeared and the long-run impact of index inclusion has become negative. Inclusion worsens stock price informativeness and...

The impact of liquidity-motivated institutional trading on firms' real decisions is not confined to periods of financial crises. Firms subject to mutual fund flow-driven selling pressure reduce share issuance and investment, whereas firms experiencing buying pressure do not increase investment,...

In the maturing Private Equity industry, investments where the Private Equity fund owns a minority of the equity – as a different form of investment – are gaining influence. Those minority investments use different instruments for value creation than classic majority investments and involve...

Guided by a simple model in which hedge fund managers with access to less-profitable investment strategies take more funding risk, I show that funds with a high exposure to market-wide funding shocks - measured by changes in Libor-OIS spreads - subsequently underperform funds with a low exposure...

Trillions of dollars are invested through index funds, exchange-traded funds, and other index derivatives. The benefits of index-linked investing are well-known, but the possible broader economic consequences are unstudied. I review research which suggests that index-linked investing is...

Using a novel approach based on hurricanes, this paper contributes to the recent debate on whether nonfundamental price variations affect real economic activities. Hurricanes create liquidity demand from investors living in disaster zones. This translates into additional outflows for mutual...

Mutual funds’ switches to monthly holding disclosures reduce the efficiency of corporate investments. Consistent with a crowding-out mechanism, the evidence suggests that monthly portfolio disclosures discourage information production activities by other market participants and, consequently,...

This article discusses the definition and determinants of capacity, and outlines a practical approach for analyzing the capacity of equity funds. It is argued that capacity analysis should focus on ‘effective capacity' for the active component of a portfolio, defined as the assets under...

I propose a new method to isolate a plausibly exogenous component of mutual fund flows in order to estimate the price impact of fire sales. The method addresses a potential reverse causality problem: instead of mutual fund outflows inducing fire sales, which drive down prices, poor stock returns...

A large and rapidly growing literature examines the impact of misvaluation on firm policies by using mutual fund outflow-induced price pressure to isolate non-fundamental price variation. I demonstrate that the standard approach to computing outflow-induced price pressure produces a measure that...