Despite rich investment opportunities presented by market dislocations, most US active equity mutual funds underperform passive benchmarks between February 20 and April 30, 2020. The average fund underperforms the S&P 500 index by 5.6% during the ten-week period (29% annualized). The average underperformance relative to the style benchmark is 2.1% (11% annualized). Eighty percent of funds have negative CAPM alphas, and average fund alphas computed relative to five different factor models are all negative. These results undermine the popular hypothesis that active funds make up for their disappointing unconditional performance by performing well in recessions.
Finding•Nov 02, 2022
Know Your Customer: Informed Trading by Banks
Christian Leuz, Rainer Haselmann, Sebastian Schreiber
Banks’ lending relationships inform their trading and underscore the potential for conflicts of interest in universal banking, despite regulatory attempts to limit such exposure.
Topics: Financial Markets
Finding•Oct 18, 2022
Calculating the Costs and Benefits of Advance Preparations for Future Pandemics
Rachel Glennerster, Christopher M. Snyder, Brandon Joel Tan
Without additional action we should expect to lose an average of at least $800 billion every year to future pandemics. Investing to expand vaccine production so that we could vaccinate 70% of the global population against a new virus within six months would cost $60 billion up front and $5 billion a year and generate an expected net present value of over $400 billion. If the US went it alone it would generate $47 billion in net benefits or $141 per head, just from the first significant pandemic.
Finding•Oct 12, 2022
Long Social Distancing
Steven J. Davis, Jose Maria Barrero, Nicholas Bloom
More than 10 percent of Americans with recent work experience will continue social distancing after the COVID-19 pandemic ends, and another 46 percent will do so in limited ways, with older persons, women, the less educated, lower wage earners, and “face-to-face” workers more inclined to social distance.
Topics: COVID-19, Employment & Wages