When Does a Mutual Fund's Trade Reveal its Skill?

We conjecture that a mutual fund manager with superior stock selection ability is more likely to benefit from trading in stocks affected by information-events. Taking the probability of informed trading (PIN, Easley, Kiefer, O'Hara, and Paperman, 1996) to measure the amount of informed trading in a stock, and inferring mutual fund trades from a large sample of mutual fund holdings, we provide empirical support for the conjecture. Funds trading high-PIN stocks exhibit superior performance on average, and superior performance that is more likely to persist. The findings are not due to price momentum or the higher returns earned by high-PIN stocks on average. Conclusions remain the same after testing for alternative measures for the amount of informed trading. Decomposing a fund's stock selection ability into "informed trading" and "liquidity provision" adds further insight into fund's underlying strengths. Impatient informed trading is a significant source of alpha for funds trading high-PIN stocks, while liquidity provision is more important as a source of alpha for funds trading low-PIN stocks.

Cross-market timing in security issuance

The conventional view of market timing suggests an unambiguous, negative relation between equity misvaluation and the equity share in new issues-that is, firms with overvalued equity issue more equity and, all else equal, less debt. We question this conventional view in the paper. Using price pressure resulting from mutual funds' flow-induced trading to identify equity misvaluation, we first show that equity and debt prices are affected by the same shocks, but to different degrees. Next, we document substantial cross-sectional variation in the sensitivity of issuance decisions to equity misvaluation. In particular, firms with sufficient internal resources increase equity issues and yet decrease debt issues in our measure of equity misvaluation; in contrast, firms that are heavily dependent on external finance increase both equity and debt issues, to take advantage of the misvaluation in both. In sum, this paper provides evidence that equity and debt can be jointly (mis)priced, and more important, examines the resulting impact on firms' issuance decisions

Informed Trading, Liquidity Provision, and Stock Selection by Mutual Funds

We show that a mutual fund's "stock selection skill" computed using the Daniel, Grinblatt, Titman and Wermers (1997) procedure can be decomposed into additional components that include impatient "informed trading" and "liquidity provision," thereby helping us understand how a fund creates value. We validate our method by verifying that liquidity provision is the dominant component of selection skill for Dimensional Fund Advisors U.S. Micro Cap fund, as observed by Keim (1999). Index funds lose on liquidity absorbing trades, since they pay the price impact on trades triggered by index rebalancing, inflows and redemptions. Consistent with the view that a mutual fund manager with superior stock selection ability is more likely to benefit from trading in stocks affected by information events, we find that funds trading such stocks exhibit superior performance that is more likely to persist. Further, such superior performance comes mostly from impatient informed trading. We also find that informed trading is more important for growth-oriented funds while liquidity provision is more important for younger funds with income orientation.

Exploited by complexity

Due to their complex features, structured financial products can hurt the average investor. Are certain investors particularly vulnerable? Using account-level transaction data of retail structured funds, we show that the rich (sophisticated) benefit from complexity at the expense of the poor (naive). The poor-to-rich wealth transfer that results from trading structured funds is substantially greater than from trading simple, nonstructured funds. In an event study, we further confirm that part of this wealth transfer can be directly attributed to investors' differing responses to complexity. In particular, when a market crash triggers funds into a restructuring process and their prices are expected to shrink by half on a given day, the poor and naive subset of investors fails to respond effectively

Generative News Recommendation

Most existing news recommendation methods tackle this task by conducting semantic matching between candidate news and user representation produced by historical clicked news. However, they overlook the high-level connections among different news articles and also ignore the profound relationship between these news articles and users. And the definition of these methods dictates that they can only deliver news articles as-is. On the contrary, integrating several relevant news articles into a coherent narrative would assist users in gaining a quicker and more comprehensive understanding of events. In this paper, we propose a novel generative news recommendation paradigm that includes two steps: (1) Leveraging the internal knowledge and reasoning capabilities of the Large Language Model (LLM) to perform high-level matching between candidate news and user representation; (2) Generating a coherent and logically structured narrative based on the associations between related news and user interests, thus engaging users in further reading of the news. Specifically, we propose GNR to implement the generative news recommendation paradigm. First, we compose the dual-level representation of news and users by leveraging LLM to generate theme-level representations and combine them with semantic-level representations. Next, in order to generate a coherent narrative, we explore the news relation and filter the related news according to the user preference. Finally, we propose a novel training method named UIFT to train the LLM to fuse multiple news articles in a coherent narrative. Extensive experiments show that GNR can improve recommendation accuracy and eventually generate more personalized and factually consistent narratives.Comment: Accepted by WWW 202

The influence of baryons on the clustering of matter and weak lensing surveys

Future weak lensing measurements of cosmic shear will reach such high accuracy that second order effects in weak lensing modeling, like the influence of baryons on structure formation, become important. We use a controlled set of state of the art cosmological simulations to quantify this effect by comparing pure N-body dark matter runs with corresponding hydrodynamical simulations, carried out both in non-radiative, and in dissipative form with cooling and star formation. In both hydrodynamical simulations, the clustering of the gas is suppressed while that of dark matter is boosted at scales k>1 h/Mpc. Despite this counterbalance between dark matter and gas, the clustering of the total matter is suppressed by up to 1 percent at 1<k<10 h/Mpc, while for k ~ 20 h/Mpc it is boosted, up to 2 percent in the non-radiative run and 10 percent in the run with star formation. The stellar mass formed in the latter is highly biased relative to the dark matter in the pure N-body simulation. Using our power spectrum measurements to predict the effect of baryons on the weak lensing signal at 100<l<10000, we find that baryons may change the lensing power spectrum by less than 0.5 percent at l<1000, but by 1 to 10 percent at 1000<l<10000. The size of the effect exceeds the predicted accuracy of future lensing power spectrum measurements and will likely be detected. Precise determinations of cosmological parameters with weak lensing, and studies of small-scale fluctuations and clustering, therefore rely on properly including baryonic physics.Comment: 5 papges, accepted for publication in ApJ(Letters

About One-point Statistics of the Ratio of Two Fourier-transformed Cosmic Fields and an Application

The Fourier transformation is an effective and efficient operation of Gaussianization at the one-point level. Using a set of N-body simulation data, we verified that the one-point distribution functions of the dark matter momentum divergence and density fields closely follow complex Gaussian distributions. The one-point distribution function of the quotient of two complex Gaussian variables is introduced and studied. Statistical theories are then applied to model one-point statistics about the growth of individual Fourier mode of the dark matter density field, which can be obtained by the ratio of two Fourier transformed cosmic fields. Our simulation results proved that the models based on the Gaussian approximation are impressively accurate, and our analysis revealed many interesting aspects about the growth of dark matter's density fluctuation in Fourier space.Comment: 15 pages, 13 figures. Accepted by Ap

Bulk flow of halos in \Lambda CDM simulation

Analysis of the Pangu N-body simulation validates that the bulk flow of halos follows a Maxwellian distribution which variance is consistent with the prediction of the linear theory of structure formation. We propose that the consistency between the observed bulk velocity and theories should be examined at the effective scale of the radius of a spherical top-hat window function yielding the same smoothed velocity variance in linear theory as the sample window function does. We compared some recently estimated bulk flows from observational samples with the prediction of the \Lambda CDM model we used; some results deviate from expectation at a level of ~ 3\sigma but the discrepancy is not as severe as previously claimed. We show that bulk flow is only weakly correlated with the dipole of the internal mass distribution, the alignment angle between the mass dipole and the bulk flow has a broad distribution peaked at ~ 30-50 deg., and also that the bulk flow shows little dependence on the mass of the halos used in the estimation. In a simulation of box size 1Gpc/h, for a cell of radius 100 Mpc/h the maximal bulk velocity is >500 km/s, dipoles of the environmental mass outside the cell are not tightly aligned with the bulk flow, but are rather located randomly around it with separation angles ~ 20-40 deg. In the fastest cell there is a slightly smaller number of low-mass halos; however halos inside are clustered more strongly at scales > ~ 20 Mpc/h, which might be a significant feature since the correlation between bulk flow and halo clustering actually increases in significance beyond such scales.Comment: Expanded discussion on effect of selection function, in together with other minor revision. ApJ in pres

Synchronous post-acceleration of laser-driven protons in helical coil targets by controlling the current dispersion

Post-acceleration of protons in helical coil targets driven by intense, ultrashort laser pulses can enhance ion energy by utilizing the transient current from the targets’ self-discharge. The acceleration length of protons can exceed a few millimeters, and the acceleration gradient is of the order of GeV/m. How to ensure the synchronization between the accelerating electric field and the protons is a crucial problem for efficient post-acceleration. In this paper, we study how the electric field mismatch induced by current dispersion affects the synchronous acceleration of protons. We propose a scheme using a two-stage helical coil to control the current dispersion. With optimized parameters, the energy gain of protons is increased by four times. Proton energy is expected to reach 45 MeV using a hundreds-of-terawatts laser, or more than 100 MeV using a petawatt laser, by controlling the current dispersion

How Do Global Banks Scramble for Liquidity? Evidence from the Asset-Backed Commercial Paper Freeze of 2007

In August of 2007, banks faced a freeze in funding liquidity from the asset-backed commercial paper (ABCP) market. We investigate how banks scrambled for liquidity in response to this freeze and its implications for corporate borrowing. Commercial banks in the United States raised deposits and took advances from Federal Home Loan Banks (FHLBs). In contrast, foreign banks - with limited access to the deposit market and FHLB advances - lent less in the overnight interbank market and borrowed more from the Federal Reserve's Term Auction Facility (TAF) auctions. Relative to before the ABCP freeze and relative to their non-U.S. dollar lending, foreign banks with ABCP exposure charged higher interest rates to corporations for syndicated loan packages denominated in dollars. The results point to a funding risk in global banking, manifesting as currency shortages for banks engaged in maturity transformation in foreign countries