Journal of Financial Economics, forthcoming.

Abstract: We study the link between beta predictability and the price of risk. An investor who desires exposure to a certain risk factor needs to predict what next period's beta will be. We use a simple model to show that an ambiguity averse agent's demand is lower when betas are hard to predict, leading to a reduction in risk premiums. We test the implications for downside betas and VIX betas. We find that they have economically and statistically small prices of risk once we account for the fact that an investor cannot observe ex-post realized betas when determining asset demand.

Presentations: European Finance Association (2019), Lubrafin (2019), 17th Colloquium on Financial Markets Asset Management (2018), Frontiers of Factor Investing (2018), Tilburg University Brownbag Seminar (2016,2017,2018)

Working Papers

Abstract: Investors leave large amounts of money on the table when investing in index funds, a popular investment product that accounts for 40% of U.S. equity funds. I show that even though high fees strongly predict poor performance, investors have little sensitivity to fees. This can be explained by fund intermediation in the retail sector and the legal standard of care that intermediaries have towards their clients. Net inflows to high-fee funds are higher when brokers and financial advisors receive sales commissions from the investment management company. When funds are sold through intermediaries held to higher standard of care, such as those sold to employer sponsored defined contribution pension plans, this is no longer the case. Together, this evidence suggests imposing fiduciary duties on fund intermediaries improves investor welfare.

Runner-up for Best Paper Award in the FMA 2020 annual conference.

Presentations: Financial Management Association (2020), Western Economic Association International (2020), World Finance Conference (2020), Erasmus University Rotterdam Seminar (2020), Tilburg University Brownbag Seminar (2018,2019), Tilburg GSS Seminar (2018)


Abstract: Whether teams attenuate or exacerbate the behavioral biases which are pervasive at the individual level is an open question. To address this question, we use the mutual fund industry as a laboratory. Our focus is on how return extrapolation, a bias in investor behavior that has received considerable attention in recent work, is transmitted from individual fund managers to the team-managed funds they join. We show that teams heavily attenuate the influence of extrapolation bias on funds’ trading behavior. Further evidence shows that the elicitation of team members’ inner cognitive reflection can be responsible for teams’ reduction in behavioral biases. Our results highlight the attenuation of the extrapolation bias as a potential benefit of team-based asset management.

Presentations: NBER Behavioral Finance Meeting (scheduled), Academic Research Colloquium (Washington, scheduled), FMA (Denver, scheduled), Tilburg University.