We examine how investor demand for leverage shapes asset management fees. We show that in the sample of U.S. equity mutual funds: (1) fees increase in fund market beta precisely for beta larger than one; (2) this relation becomes stronger and high-beta funds experience larger inflows when leverage constraints tighten; and (3) low net alphas are especially common among high-beta funds. These results are consistent with a model in which asset managers compete for leverage-constrained investors with heterogeneous risk aversion. The asymmetric relation between betas and fees also extends to the HML and SMB factors.

The option-implied oil price volatility is a strong negative predictor of economic growth beyond traditional uncertainty measures. A rise in oil volatility also predicts an increase in oil inventories and a reduction in oil consumption, in line with a propagation channel through the oil sector. We explain these findings within a macro-finance model featuring stochastic uncertainties and precautionary oil inventories: firms increase oil inventories when oil volatility rises, which curbs oil use for production and depresses economic activity. In the model and the data, aggregate equity prices fall at times of high oil volatility, with differential exposures across economic sectors.