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Working with one of the largest brokerages in Germany, we record what happens when unbiased investment advice is offered to a random set of approximately 8,000 active retail customers out of the brokerage's several hundred thousand retail customers. We find that investors who most need the financial advice are least likely to obtain it. The investors who do obtain the advice (about 5%), however, hardly follow the advice and do not improve their portfolio efficiency by much. Overall, our results imply that the mere availability of unbiased financial advice is a necessary but not sufficient condition for benefiting retail investors.

A central and contentious debate in many literatures concerns the relationship between financial and social performance. We advance this debate by measuring the financial--social performance link within mutual funds that practice socially responsible investing (SRI). SRI fund managers have an array of social screening strategies from which to choose. Prior studies have not addressed this heterogeneity within SRI funds. Combining modern portfolio and stakeholder theories, we hypothesize that the financial loss borne by an SRI fund due to poor diversification is offset as social screening intensifies because better-managed and more stable firms are selected into its portfolio. We find support for this hypothesis through an empirical test on a panel of 61 SRI funds from 1972 to 2000. The results show that as the number of social screens used by an SRI fund increases, financial returns decline at first, but then rebound as the number of screens reaches a maximum. That is, we find a curvilinear relationship, suggesting that two long-competing viewpoints may be complementary. Furthermore, we find that financial performance varies with the types of social screens used. Community relations screening increased financial performance, but environmental and labor relations screening decreased financial performance. Based on our results, we suggest that literatures addressing the link between financial and social performance move toward in-depth examination of the merits of different social screening strategies, and away from the continuing debate on the financial merits of either being socially responsible or not.

We explore the impact of investment-specific technology (IST) shocks on the cross section of stock returns. Using a structural model, we show that IST shocks have a differential effect on the value of assets in place and the value of growth opportunities. This differential sensitivity to IST shocks has two main implications. First, firm risk premia depend on the contribution of growth opportunities to firm value. Second, firms with similar levels of growth opportunities comove with each other, giving rise to the value factor in stock returns and the failure of the conditional CAPM. Our empirical tests confirm the model's predictions.

A five-factor model that adds profitability (RMW) and investment (CMA) factors to the three-factor model of Fama and French (1993) suggests a shared story for several averagereturn anomalies. Specifically, positive exposures to RMW and CMA (stock returns that behave like those of profitable firms that invest conservatively) capture the high average returns associated with low market β, share repurchases, and low stock return volatility. Conversely, negative RMW and CMA slopes (like those of relatively unprofitable firms that invest aggressively) help explain the low average stock returns associated with high β, large share issues, and highly volatile returns.

Many financial markets are characterized by strong relationships and networks, rather than arm's-length, spot market transactions. We examine the performance consequences of this organizational structure in the context of relationships established when VCs syndicate portfolio company investments. We find that better-networked VC firms experience significantly better fund performance, as measured by the proportion of investments that are successfully exited through an IPO or a sale to another company Similarly, the portfolio companies of better-networked VCs are significantly more likely to survive to subsequent financing and eventual exit. We also provide initial evidence on the evolution of VC networks.

We provide a systematic analysis of the bilateral factors driving portfolio equity holdings across countries. We find that bilateral equity holdings are strongly correlated with bilateral trade in goods and services. Larger bilateral positions are also associated with proxies for informational proximity.

When does a venture capital firm withdraw from an investment project prior to its completion? This study offers a real options view on this decision by examining the contingent effects of portfolio configuration. We explore how project withdrawal can be influenced by two distinct dimensions of portfolio configuration, portfolio focus in a strategic domain and portfolio diversity across multiple domains. The empirical analysis shows that while portfolio focus weakens the negative effect of industry-level uncertainty on a venture capitalist's propensity to withdraw from a project, portfolio diversity strengthens the effect of uncertainty. This study informs current research on the boundary of real options theory and sheds light on the behavior of venture capitalists in financing entrepreneurship.

Institutional investors exhibit substantial home-state bias in private equity. This effect is particularly pronounced for public pension funds, where overweighting amounts to 9.8% of aggregate private-equity investments and 16.5% for the average limited partner. Public pension funds' in-state investments achieve performance that is lower by two to four percentage points than both their own similar out-of-state investments and similar investments in their state by out-of-state investors. Overweighting in home-state investments by public pension funds is greater in venture capital and real estate than in buyout funds. States with political climates characterized by more self-dealing invest a larger share of their portfolio in local investments, although a given local investment performs only as poorly in these states as in other states. Relative to the performance of the rest of the private equity universe, overweighting and underperformance in local investments reduce public pension fund resources by $1.2 billion per year.

An investment factor, long in low-investment stocks and short in high-investment stocks, helps explain the new issues puzzle. Adding the investment factor into standard factor regressions reduces the SEO underperformance by about 75%, the IPO underperformance by 80%, the underperformance following convertible debt offerings by 50%, and Daniel and Titman's (2006) composite issuance effect by 40%. The reason is that issuers invest more than nonissuers, and the investment factor earns a significantly positive average return of 0.57% per month.

Using data on the investments a large number of individual investors made through a discount broker from 1991 to 1996, we find that households exhibit a strong preference for local investments. We test whether this locality bias stems from information or from simple familiarity. The average household generates an additional annualized return of 3.2% from its local holdings relative to its nonlocal holdings, suggesting that local investors can exploit local knowledge. Excess returns to investing locally are even larger among stocks not in the S&P 500 index (firms for which information asymmetries between local and nonlocal investors may be largest).