We uncover a link between momentum and overvaluation: assets that generate strong momentum profits have lower risk-adjusted unconditional returns; conversely, trading momentum within overvalued assets doubles the profit of the standard momentum strategy. We compute the profits of a momentum strategy within various portfolios; portfolios within which momentum is profitable are defined as momentum trading opportunity (MTO). High-MTO assets have negative unconditional alphas and concentrate in the short legs of most anomalies; controlling for MTO reduces anomaly alphas by up to half. These results imply that the existence of other anomalies is closely linked to the existence of momentum and they should be studied jointly.

In contrast with theoretical predictions, high-fee active equity funds generate worse net-of-expenses performance. We show that this fee-performance puzzle is driven by the preference of high-fee funds for stocks with low operating profitability and high investment rates, characteristics associated with low expected returns. After controlling for exposures to profitability and investment factors, we find high-fee funds significantly outperform low-fee funds before expenses and achieve similarly poor net-of-fees performance. In resolving the fee-performance puzzle, our findings provide support to the theoretical prediction that net alphas are unrelated to fees and challenge the common advice to prefer low-fee funds over high-fee counterparts.

By decomposing close-to-close mid-quote returns of ETFs into their overnight and intraday components, we find that the overnight return is significantly positive, whereas the intraday return is negative. This overnight–intraday return differential is ubiquitous across ETFs tracking different asset classes or assets located in different time zones. This phenomenon cannot be explained by differences in overnight and intraday risks, macroeconomic announcements, or information asymmetry. Instead, our analysis reveals that the return pattern is primarily driven by demand shocks from retail investors and limited supply from arbitrageurs. These results indicate that the convenience of buying ETFs during intraday trading hours carries a hidden cost to investors.