Abstract Prior studies on cryptocurrency momentum overlook liquidation risk and other real-world frictions and inadequately assess its profitability. We evaluate time-series and cross-sectional momentum addressing these issues. When portfolios are marked to market daily, many cross-sectional momentum portfolios are liquidated, and those with statistically significant mean returns often earn negative profits. The mean return is insufficient for testing profitability in the cryptocurrency market, where returns are heavily skewed and fat-tailed. Evidence of time-series momentum is strong, whereas evidence of cross-sectional momentum is almost nonexistent. Investor overconfidence and the disposition effect appear to be important drivers of cryptocurrencies’ price dynamics. (JEL G10, G11, G12)
This paper studies how fund-family advisors use cross-fund subsidization to manipulate fund performances and maximize fund-family values, and how this activity shapes market equilibrium. The trade-off between subsidization efficiency and funds' endogenous profit-performance convexities determines the subsidization. When the effect of profit-performance convexities dominates, advisors optimally use low-value funds to subsidize high-value funds. When the effect of subsidization efficiency dominates, advisors use liquid funds to subsidize temporarily distressed funds. The subsidization induces negative asymmetric cross-fund flow-performance sensitivities: high-value (liquid) funds' performances strongly decrease low-value (temporarily distressed) funds' flows, whereas low-value (temporarily distressed) funds' performances weakly reduce high-value (liquid) funds' flows. (JEL G11, G14, G23, D02, D83)
Abstract This paper provides the first systematic evidence on a recent industry innovation: money market funds offering multiple intraday NAV strikes and redemption windows. Emerging after the 2016 floating-NAV reforms, these multistrike funds hold safer, more liquid assets than traditional single-strike funds offering end-of-day redemptions, yet face substantially larger outflows during periods of market stress. Our findings point to a structural concentration of liquidity-sensitive investors in multistrike funds, revealing how fund microstructure influences run dynamics among sophisticated institutions. Despite evolving liquidity requirements, the core behavioral and structural differences we identify remain highly relevant for evaluating ongoing and future regulatory reforms. (JEL G01, G18, G23, G28)
We study fee competition between an incumbent and entrant central counterparty (CCP) under two regimes: interoperability (trades clear at each party's own CCP) and preferred clearing (trades clear at the incumbent unless both counterparties choose otherwise). Preferred clearing creates network effects that force the entrant to undercut aggressively, while the incumbent sustains higher fees. Fee spreads, average trading costs, and industry profits increase under preferred clearing. However, interoperability is costly because linked CCPs must post collateral against cross-CCP exposure. Interoperability improves welfare when link costs are either low or high enough that the incumbent drops fees to reduce clearing fragmentation. (JEL G11, G12, G14)
Underestimating discount rate volatility leads to asset pricing anomalies. Using analysts' return forecasts as proxies for subjective discount rates, I show that these forecasts exhibit systematically lower volatility than CAPM-based benchmarks, whose objective fluctuations negatively predict future returns, especially for high beta-volatility stocks. A misvaluation measure based on this underestimation significantly predicts cross-sectional CAPM alphas, while a tradable factor explains 12 prominent anomalies. These findings underscore discount rate volatility underestimation as a unifying explanation for analysts' forecast errors and cross-sectional return predictability, linking recent evidence on aggregate subjective belief dynamics with firm-level mispricing.
