Discussion Papers

Recent studies show that single-quarter institutional herding positively predicts short-term returns. Motivated by the theoretical herding literature...

We offer a rational expectations model of the dynamics of innovative industries. The fundamental value of innovations is uncertain and one must learn...

We investigate the effect of the ability of “non-traditional” funds to short-sell the equity of their debtors. This enables the funds to vote on the...

We survey theoretical developments in the literature on the limits of arbitrage. This literature investigates how costs faced by arbitrageurs can...

In this paper we develop a simple theoretical model to analyze the impact of institutional herding on asset prices. A growing empirical literature has...

By connecting stocks through common active mutual fund ownership, we forecast cross-sectional variation in return covariance, controlling for...

We study flows between investment funds and their effects on asset prices in a simple two-period version of Vayanos and Woolley (2010, VW). As in VW...

This paper provides empirical evidence that managers adjust firm advertising expenditures to influence investor behavior and short-term stock prices...

This paper proposes and tests an investment-flow based explanation for three empirical findings on return predictability – the persistence of mutual...

We model the term structure of interest rates as resulting from the interaction between investor clienteles with preferences for specific maturities...

We study innovative industries subject to two risks. First, it is uncertain whether the innovation is strong or fragile. Second, it is difficult to...

We examine how liquidity and asset prices are affected by the following market imperfections: asymmetric information, participation costs, transaction...

This paper is no longer available, the revised version of this paper can be found as Paul Woolley Centre Paper 4, FMG Discussion Paper 632

We propose a rational theory of momentum and reversal based on delegated portfolio management. Flows between investment funds are triggered by changes...

This paper provides powerful evidence that mutual fund managers can pick stocks that outperform the market. Many have argued that the inability of...

We examine empirically how the maturity structure of government debt affects bond yields and excess returns. Our analysis is based on a theoretical...