Key Areas of Research

Holding Horizon: A New Measure of Active Investment Management
Journal of Financial and Quantitative Analysis

This article introduces a new holding horizon measure of active management and examines its relation to future risk-adjusted fund performance (alpha). Our measure reveals a wide cross-sectional dispersion in mutual fund investment horizons, and shows that long-horizon funds exhibit positive future long-term alphas by holding stocks with superior long-term fundamentals. Further, stocks largely held by long-horizon funds outperform stocks largely held by short-horizon funds by more than 3%annually, adjusted for risk, over the following 5-year period. We also find a clientele effect: to reduce liquidity costs, long-horizon funds attract more long-term investors through share classes that carry load fees.

Chunhua Lan (University of New Brunswick), Fabio Moneta (Queen's University), and Russ Wermers

• Markets and enterprise performance
• Technology-driven transformations, disruptions, and biases in the production, assurance, and analysis of financial and business information
• Policy innovation and strategic foresight
• Consumer behavior and social influence
• Finance

Equity Term Structures without Dividend Strips Data
Journal of Finance

We use a large cross section of equity returns to estimate a rich affine model of equity prices, dividends, returns, and their dynamics. Our model prices dividend strips of the market and equity portfolios without using strips data in the estimation. Yet model-implied equity yields closely match yields on traded strips. Our model extends equity term-structure data over time (to the 1970s) and across maturities, and generates term structures for various equity portfolios. The novel cross section of term structures from our model covers 45 years and includes several recessions, providing a novel set of empirical moments to discipline asset pricing models.

Stefano Giglio, Yale School of Management
Bryan Kelly, Yale School of Management
Serhiy Kozak, R.H. Smith School of Business, University of Maryland

• Finance