Corporate bond mutual funds tend to hold illiquid assets but provide liquid claims to their investors. How do they manage liquidity to meet investor redemptions? We show that, during tranquil market conditions, these funds tend to reduce liquid asset holdings such as cash and government bonds to...

The consensus wisdom of active mutual fund managers, as reflected in their average over- and underweighting decisions, contains valuable information about future stock returns. Analyzing a comprehensive sample of active U.S. equity funds 1984-2008, we find that stocks heavily overweighted by...