Skip to main content

Summary

Characteristics of Mutual Fund Portfolios: Where Are the Value Funds?
Author(s):
Martin Lettau, University of California, Berkeley and NBER
Sydney C. Ludvigson, New York University and NBER
Paulo Martins Manoel, University of California at Berkeley
Discussant(s):
Kent D. Daniel, Columbia University and NBER
Abstract:

Lettau, Ludvigson, and Manoel provide a comprehensive analysis of portfolios of active mutual funds, ETFs and hedge funds through the lens of risk (anomaly) factors. The researchers show that that these funds do not systematically tilt their portfolios towards profitable factors, such as high book-to-market (BM) ratios, high momentum, small size, high profitability and low investment growth. Strikingly, there are virtually no high-BM funds in the sample while there are many low-BM "growth" funds. Portfolios of "growth" funds are concentrated in low BM-stocks but "value" funds hold stocks across the entire BM spectrum In fact, most "value" funds hold a higher proportion of their portfolios in low-BM ("growth") stocks than in high-BM ("value") stocks. While there are some micro/small/mid-cap funds, the vast majority of mutual funds hold very large stocks. But the distributions of mutual fund momentum, profitability and investment growth are concentrated around market average with little variation across funds. The characteristics distributions of ETFs and hedge funds do not differ significantly from the those of mutual funds. Lettau, Ludvigson, and Manoel conclude that the characteristics of mutual fund portfolios raises a number of questions about why funds do not exploit well-known return premia and how their portfolio choices affects asset prices in equilibrium.

Downloads:
Top Wealth in the United States: New Estimates and Implications for Taxing the Rich
Author(s):
Matthew Smith, Department of the Treasury
Owen M. Zidar, Princeton University and NBER
Eric Zwick, University of Chicago and NBER
Discussant(s):
John H. Cochrane, Stanford University and NBER
Abstract:

Smith, Zidar, and Zwick use administrative tax data to estimate top wealth in the United States. The researchers build on the capitalization approach in Saez and Zucman (2016) while accounting for heterogeneity within asset classes when mapping income flows to wealth. The researchers' approach incorporates four quantitatively relevant sources of eterogeneity: (1) higher fixed income returns at the top, (2) realized capital gains that do not represent corporate stock sales, (3) industry variation in returns to pass-through business wealth, and (4) geographic variation in property tax rates. Overall, wealth concentration is very high: the top 1% holds as much wealth as the bottom 90%. However, the "P90-99" class holds more wealth than either group after accounting for heterogeneity. Relative to a top 0.1% wealth share of more than 20% under equal returns, Smith, Zidar, and Zwick estimate a top 0.1% wealth share of [15%] and find that the rise since 1980 in top wealth shares falls by [half]. Top portfolios depend less on fixed income and public equity, depend more on private equity and housing, and more closely match the composition reported in the SCF and estate tax returns. The researchers' adjustments reduce mechanical revenue estimates from a wealth tax and top capital income shares in distributional national accounts, which depend on well-measured estimates of top wealth. Though the capitalization approach has advantages over other methods of estimating top wealth, the researchers emphasize that considerable uncertainty remains inherent to the approach by showing the sensitivity of estimates to different assumptions.

Downloads:
Global Banks and Systemic Debt Crises
Author(s):
Juan M. Morelli, Federal Reserve Board
Pablo Ottonello, University of Michigan and NBER
Diego Perez, New York University and NBER
Discussant(s):
Hanno Lustig, Stanford University and NBER
Abstract:

Morelli, Ottonello, and Perez study the role of global financial intermediaries in international lending. The researchers construct a model of the world economy, where heterogeneous borrowers issue risky securities purchased by financial intermediaries. Aggregate shocks transmit internationally through financial intermediaries' net worth. The strength of this transmission is governed by the degree of frictions intermediaries face financing their risky investments. Morelli, Ottonello, and Perez provide direct empirical evidence on this mechanism showing that, around Lehman Brothers' collapse, emerging-market bonds held by more-distressed global banks experienced larger price contractions. A quantitative analysis of the model shows that global financial intermediaries play a relevant role driving borrowing-cost and consumption fluctuations in emerging-market economies, both during debt crises and in regular business cycles. The portfolio of financial intermediaries and the distribution of bond holdings in the world economy are key to determine aggregate dynamics.

Downloads:
Are Intermediary Constraints Priced?
Author(s):
Wenxin Du, University of Chicago and NBER
Benjamin M. Hébert, Stanford University and NBER
Amy Wang Huber, Stanford University
Discussant(s):
Stavros Panageas, University of California, Los Angeles and NBER
Abstract:

Violations of no-arbitrage conditions measure the shadow cost of constraints on intermediaries, and the risk that these constraints tighten is priced. The researchers demonstrate in an intermediary-based asset pricing model that violations of no-arbitrage such as covered interest rate parity (CIP) violations, along with intermediary wealth returns, can be used to price assets. They describe a "forward CIP trading strategy" that bets on CIP violations becoming smaller, and show that its returns help identify the price of the risk that the shadow cost of intermediary constraints increases. This risk contributes substantially to the volatility of the stochastic discount factor, and appears to be priced consistently in US treasury, emerging market sovereign bond, and foreign exchange portfolios.

Downloads:

Participants

Anat Admati, Stanford University
Markus Baldauf, University of British Columbia
Gregory Duffee, Johns Hopkins University
Thomas J. Gilbert, University of Washington
Indrajit Mitra, Federal Reserve Bank of Atlanta
Ishita Sen, Harvard University
Or Shachar, Federal Reserve Bank of New York
Brian Weller, REMOVED BY HIS REQUEST

Related

Programs

More from NBER

In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, and the Bulletin on Health — as well as online conference reports, video lectures, and interviews.

Economics of Digitization Figure 1
  • Article
The NBER Economics of Digitization Project, established in 2010 with support from the Alfred P. Sloan Foundation, provides a forum for disseminating research...
claudiagoldinpromoimagelecture.png
  • Lecture
Claudia Goldin, the Henry Lee Professor of Economics at Harvard University and a past president of the American...
2020 Methods Lecture Promo Image
  • Lecture
The extent to which individual responses to household surveys are protected from discovery by outside parties depends...