The Performance of Short-term Institutional Trades

Using a database of daily institutional trades, we document that a majority of short-term institutional trades lose money. In aggregate, over 23% of round-trip trades are held for less than three months, and the returns on these trades average -3.91% (non-annualized). These losses are pervasive across all types of stocks, with the lowest returns occurring in small stocks, value stocks, and low-momentum stocks. Short-term trades lose more in more volatile markets. Across funds, the worst short-term returns accrue to funds that do the most trading, and there is no evidence of persistent skill or disposition effect in short-term institutional trades

Financial Globalization and Risk Sharing: Welfare Effects and the Optimality of Open Markets

To study the welfare effects of investment barriers and the opening of markets to foreigners, we construct an equilibrium model of international asset pricing without agency costs that allows endogenous market participation among heterogeneous agents. Equilibrium prices and the set of participating and non-participating agents are jointly determined in equilibrium and the ability of agents to choose to participate in the market affects prices of domestic and foreign assets. We examine the welfare effects of non-participation and find that when a country moves from complete segmentation to open markets for foreigners, the cost of capital falls in the domestic market. This is consistent with empirical findings in the international asset pricing literature. Through the endogenous participation mechanism, our model is able to capture sources of economic growth. Contrary to previous models, however, we show that opening markets is not Pareto-optimal and we identify a class of domestic agents whose welfare is lower after the opening of markets. These finding have political economy interpretations and policy implications

Financial markets 2020: When will P/E ratios be great again?

Let's review: The Federal Reserve cut the federal funds rate. This shifted many interest rates down (not the mortgage rate though). More than the damage from tariffs, the uncertainty of what Mr. Trump might do next caused business confidence to fall. This has led to increases in hurdle rates for capital projects across the board, thus slowing capital investment, ultimately yielding slower output that is reflected in roughly 2 percent GDP growth in the last two quarters. President Trump and some in the White House blame the Federal Reserve and Europe for this slump, but neither explanation holds up. * Europe hasn't grown fast for decades, and its 2017 growth bump was helped by faster U.S. growth. * Businesses were not starving for money even before the Fed began cutting rates again this summer. The best sector, communication services, is expected to rise 9.1 percent, while the worst sector, financials, is predicted to rise 1.9 percent. * Year-over-year revenue growth: This is a positive 3.1 percent for the S&P 500 from third quarter 2018 to third quarter 2019, led by health care. * Quarter 3 earnings and revenue "beats": Of the 355 companies in the S&P 500 that have reported for the third quarter of 2019, 76 percent have reported earnings above the mean estimate of analysts (higher than the historical average of 69 percent) and 61 percent have reported revenues above the mean estimate (below the historical average of 66 percent). * IPOs: There have been 140 IPOs (as of October 15) that raised $43 billion. This is down 4 percent over this time last year, but much larger than 2016-2017

Managerial Performance and the Cross-Sectional Pricing of Closed-End Funds

This paper finds that discounts and premiums of closed-end funds reflect the market’s assessment of anticipated managerial performance. Using single and multiple benchmarks, we present evidence that there is a significant and positive relation between stock fund premiums and future net asset value performance over the following year. The relation is not caused by the anticipation of future expenses. The conclusions are the same if a measure of noise-trading (or the “investor sentiment index”) is subtracted from a fund’s discount/premium. We also find that bond closed-end funds show no such relation between premium and net asset value performance

Managerial Performance and the Cross-Sectional Pricing of Closed-End Funds

This paper finds that discounts and premiums of closed-end funds reflect the market’s assessment of anticipated managerial performance. Using single and multiple benchmarks, we present evidence that there is a significant and positive relation between stock fund premiums and future net asset value performance over the following year. The relation is not caused by the anticipation of future expenses. The conclusions are the same if a measure of noise-trading (or the “investor sentiment index”) is subtracted from a fund’s discount/premium. We also find that bond closed-end funds show no such relation between premium and net asset value performance

MUNICIPAL BORROWING COSTS AND THE NEW YORK CITY CRISIS

Abstract not availabl