We survey the recent literature on learning in financial markets. Our main theme is that many
financial market phenomena that appear puzzling at first sight are easier to understand once …

Just over 20 years have passed since the publication of Mark Carhart's landmark 1997 study
on mutual funds. Its conclusion—that the data did “not support the existence of skilled or …

We propose a new definition of skill as general cognitive ability to pick stocks or time the
market. We find evidence for stock picking in booms and market timing in recessions …

We examine the relation between indexing and active management in the mutual fund
industry worldwide. Explicit indexing and closet indexing by active funds are associated with …

This paper develops a simple technique that controls for “false discoveries,” or mutual funds
that exhibit significant alphas by luck alone. Our approach precisely separates funds into (1) …

The paper provides empirical evidence that strategic complementarities among investors
generate fragility in financial markets. Analyzing mutual fund data, we find that, consistent …

We propose a new approach to imposing economic constraints on time series forecasts of
the equity premium. Economic constraints are used to modify the posterior distribution of the …

Using a robust bootstrap procedure, we find that top hedge fund performance cannot be
explained by luck, and hedge fund performance persists at annual horizons. Moreover, we …

We model fund turnover in the presence of time‐varying profit opportunities. Our model
predicts a positive relation between an active fund's turnover and its subsequent benchmark …

We show theoretically that the responsiveness of a fund manager's portfolio allocations to
changes in public information decreases in the manager's skill. We go on to estimate this …