Working papers
"Mutual Fund Performance, Fees and Flows", LBS, 2010 (available soon)
Abstract: This paper studies the relation between fees and performance in the US mutual fund industry. As rational model predicts, in a competitive market fees should be positively related to the risk-adjusted performance (alpha) if investors can fully hedge against idiosyncratic risks. We take a step forward and show that not only alpha but also its volatility has an impact on the fees and fund flows. In a simple model, we show how fees and fund flows may depend on alpha and its volatility, for some given parameters of risk aversion of investors and the manager of the fund. By testing the model, we obtain three new results. First, the level of fees is positively related to the volatility of alpha, meaning that the funds with higher volatility charge higher fees. Moreover, fees increase in alpha. Second, we study the changes in fees and provide evidence that these changes are negatively related to alpha and positively related to the volatility of alpha. Finally, fund flows depend positively on the volatility of alpha. Intuitively, it means that investors might consider volatility of alpha as an option rather than a negative sign of the fund's performance. We show that the model can reproduce these results if investors have a risk-aversion coefficient less than 1 and the fund manager is sufficiently risk-averse.

"Human Capital, Training and Portfolio Choice over the Life Cycle", LBS, 2009
Abstract: This paper studies optimal labor, consumption, training and portfolio decisions in a life-cycle model with human capital and wealth accumulation. The agent can increase his future earnings by augmenting the human capital through training and learning-by-doing. The framework allows for retirement capital and i.i.d. process for employment and assumes two types of agents: constrained, who cannot invest into stock, and unconstrained. It is shown that the levels of wage income and the shape of wealth can be matched to the data, while the share of risky asset in the portfolio exhibit an inverse U-shaped form. Labor supply is shown to follow a declining pattern. Two special cases in which the agents either invest half of the wealth into risky stock or work for half of available time are studied. The agents who cannot flexibly adjust their labor or portfolio lose more than 3% of consumption and more than 6% of wealth.

"Information Acquisition, Individual and Fund Investment", LBS, 2009
Abstract: This paper analyzes static general equilibrium model with heterogenous individual investors who can either invest in homogenous funds or trade on their own account. Individuals differ in their abilities to process information about private signals and choose allocation of cash based on expected return of fund's and individual investment. I show that in equilibrium agents either invest on their own or invest in a fund, derive equilibrium price function and find that participation in individual investment depends on the value of public signal and price. The uniqueness of equilibrium is stated under additional conditions.

"Monetary Policy, Risk Premium and the Business Cycle", LBS, 2008