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.
Insights / Research Brief•Jul 26, 2023
Exporting, Global Sourcing, and Multinational Activity: Theory and Evidence from the United States
Pol Antràs, Teresa C. Fort, Evgenii Fadeev, Felix Tintelnot
Multinational firms (MNEs) are more likely to trade not only with countries in which they have affiliates, but also with other countries within their affiliates’ region. These patterns point to firm-level scale economies that arise when the fixed costs to source from, or sell in, a market are shared across all the MNE’s plants.
Topics: Financial Markets
Insights / Research Brief•Jul 20, 2023
Price Level and Inflation Dynamics in Heterogeneous Agent Economies
Greg Kaplan, Georgios Nikolakoudis, Giovanni L. Violante
This work offers new insights into the effects of persistent fiscal deficits on US inflation, revealing that targeted income redistribution during COVID increased short-term inflation significantly. The largest sustainable primary deficit is 4.6% of GDP, or 40% higher than current levels, dependent on how deficit spending is distributed.
Topics: Financial Markets, Monetary Policy
Insights / Research Brief•Jul 06, 2023
Carbon Prices and Forest preservation Over Space and Time in the Brazilian Amazon
Juliano J. Assunção, Lars Peter Hansen, Todd Munson, José A. Scheinkman
With modest transfers per ton of net CO2, Brazil would find it optimal to choose policies that produce substantial capture of greenhouse gasses in the next 30 years, suggesting that the management of tropical forests could play an important role on climate change mitigation in the near future.
Topics: Energy & Environment, Financial Markets