... that the allowance of these complex instruments is associated with poor performance and higher risk. The underperformance is most acute during market downturns, and among mutual funds that are allowed to use derivatives. We also find that mutual funds underperform when they actually use complex instruments. Overall...

...Jeffrey Pontiff; Rohit Singla We revisit the role of liquidity risk. We successfully replicate Pastor and Stambaugh’s (2003 ) gamma liquidity risk index, and within their time period, concur with their risk premium estimate. An out-of-their-time-period analysis finds post-time-period returns...