Fundamental Investment Analysis

We employ machine learning methods to identify skill among active bond mutual fund managers. Using a comprehensive dataset of 3,021 unique U.S. bond funds from May 1995 to November 2024, we demonstrate that fund-level and family-level characteristics, particularly past performance metrics, reliably predict future bond fund performance. A prediction-weighted portfolio strategy that goes long the best-10% of funds and short the worst-10% of funds generates monthly abnormal returns of 30 basis points with an information ratio of 24.6%. The outperformance persists for up to 36 months.

We use a dynamic spatial general equilibrium model of international investment and production to investigate the real implications of the last five decades of financial globalization. We introduce a wedge accounting framework to estimate country- and time-varying measures of outward and inward Revealed Financial Openness (RFO). These wedges are meant to capture all impediments to cross-border investment, rather than explicit policy measures alone.

Under standard assumptions, individuals and the government are indifferent between traditional tax-deferred retirement accounts and “front-loaded” (Roth) accounts. Adding investment fees to this benchmark, individuals are still indifferent but the government is not. We show that under weak conditions firms charge equal percent fees under both systems, yielding higher dollar fees under Traditional. We estimate that tax deferral increases demand for asset management services by $3.8 trillion, costing the government $23.4 billion in annual fees.

Earnings management involves actions by managers to influence reported financial results, often to present a more favorable view of company performance. In this chapter, we discuss the tools available to managers for earnings management. We first consider manipulation of net income through accruals and real earnings management. Then, we disaggregate earnings management along the income statement, comparing manipulation of revenue, expenses, and gains and losses.

Over the past decade, data has transformed everyday life. While it has changed the way people shop and businesses operate (Goldfarb and Tucker, 2019), it has only just begun to permeate economists thinking about the aggregate economy. In the early twentieth century, economists like Schultz (1943) analyzed agrarian economies and land-use issues. As agricultural productivity improved, production shifted more to manufacturing. Modern macroeconomics adapted with models featuring capital and labor, markets for goods, and equilibrium wages (Solow, 1956).

Private equity was a bright spot in institutional investors’ portfolios last year. The asset class held up much better than public stocks, which were whipsawed by rising rates. Read the full article at the Financial Times.