이정훈 연구실

Journal of Financial and Quantitative Analysis, Forthcoming. Mutual funds face the risk of investor withdrawals following poor short-term performance, encouraging managerial myopia. We show that fund families can insulate managers from this funding pressure by tying compensation to long-term performance. Managers with long-horizon contracts undertake more long-term investments, are less likely to window dress, and outperform their peers. Since long-horizon contracts do not shut off the funding pressure but simply insulate the manager from it, not all families can offer them. They are more prevalent in families that cater to patient investors and have more resources to buffer temporary liquidity shocks. Extreme outflows from bond mutual funds raise concerns about market fragility. Therefore, it is important to ask why investor redemptions are heavily coordinated during fund underperformance. Two possible explanations are the illiquidity of the underlying bond market and investor self-selection. Using an exogenous shock that improves market liquidity---and reduces the incentive to front-run---we causally show that strategic complementarity among investors declines when liquidity improves. Fund managers respond by adjusting portfolio composition and reducing liquidity buffers. Overall, enhancing systematic liquidity plays a key role in reducing strategic redemption behavior among investors and strengthening financial stability. Rational and behavioral asset pricing theories offer conflicting interpretations of the covariance structure of asset returns. Return comovement beyond what prespecified empirical factor models can explain is often interpreted in favor of frictions or behavioral explanations. However, we show that randomly grouped assets exhibit "excess" comovement