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 idiosyncratic risk premium...

In the U.S., momentum portfolios formed on returns from 12 to seven months prior to the current month deliver higher returns than momentum portfolios formed from six to two months prior, suggesting an “echo” in returns (Novy-Marx (2012)). In 37 countries not including the U.S., there is no...

We survey 218 institutional investors from 22 countries representing over $4.1 trillion in AUM regarding their practices in delegating assets to investment managers. Holding periods for investment managers are surprisingly long: 68%, 65%, and 42% of respondents report average holding periods of...

We document large variation in the cross-sectional correlation and imbalance of daily mutual fund flows from share classes catering to retail investors, retirement accounts, and financial advisors. Funds with more diversified flows on day t face lower immediacy requirements and outperform funds...