After taking into account biases induced by infrequent trading and selection, it is unlikely that illiquid asset classes have higher risk-adjusted returns than traditional liquid stock and bond markets. On the other hand, there are significant illiquidity premiums within asset classes. Portfolio...

Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call...

We present a model of optimal allocation to liquid and illiquid assets, where illiquidity risk results from the restriction that an asset cannot be traded for intervals of uncertain duration. Illiquidity risk leads to increased and state-dependent risk aversion, and reduces the allocation to...

We present a model of optimal allocation to liquid and illiquid assets, where illiquidity risk results from the restriction that an asset cannot be traded for intervals of uncertain duration. Illiquidity risk leads to increased and state-dependent risk aversion, and reduces the allocation to...

Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call...

We present a model of optimal allocation over liquid and illiquid assets, where illiquidity is the restriction that an asset cannot be traded for intervals of uncertain duration. Illiquidity leads to increased and state-dependent risk aversion, and reduces the allocation to both liquid and...

Municipal (muni) bonds are risky and trade in illiquid markets, and both effects serve to raise muni yields relative to Treasuries. On the other hand, the tax exemption of muni bonds tends to lower their yields. We decompose the muni yield spread into credit, liquidity, and tax components....

American university and college endowments now hold close to one-third of their portfolios in private equity and hedge funds. We estimate the implied beliefs of endowments about alternative assets' returns relative to equities and bonds. At the end of 2012, the typical endowment believes that...

Model portfolios are constructed using passive and active vehicles to help meet specific investment outcomes. We present a rigorous, repeatable framework for designing optimal model portfolios, which (1) selects a benchmark portfolio that reflects a target level of risk; (2) constructs a...

We introduce a methodology to estimate the historical time series of returns to investment in private equity. The approach requires only an unbalanced panel of cash contributions and distributions accruing to limited partners, and is robust to sparse data. We decompose private equity returns...