We provide novel evidence that hedge fund performance is persistent following weak hedge fund markets, but is not persistent following strong markets. Specifically, we construct two performance measures, DownsideReturns and UpsideReturns, conditioned on the level of overall hedge fund sector...

In contrast with theoretical predictions, high-fee active equity funds generate worse net-of-expenses performance. We show that this fee-performance puzzle is driven by the preference of high-fee funds for stocks with low operating profitability and high investment rates, characteristics...

Do risk disclosures by mutual funds reflect funds’ actual investment risks? Using textual analysis, we examine risk disclosures in funds’ summary prospectuses to determine whether funds do accurately disclose their risks. We first document the types of risks disclosed by funds and study the...

This paper documents a high and increasing capital concentration in the bond fund industry over the past three decades. Large funds deliver better performance and receive larger inflows than small funds, which explains the concentration of bond funds. However, large funds take more risks by...