PhD Seminar with Haohang Wu

Title: Benchmarking intensity and the regulatory cap: Exposure and real effects on US equity mutual funds

Abstract: I study how benchmarking intensity, the share of holdings owned by index-tracking capital, shapes US equity mutual funds' exposure to the 5% per-issuer diversification cap and its real consequences. A Russell 1000/2000 shift-share IV shows high-intensity active managers select broader universes whose cap-weighted positions dilute below 5%, lowering exposure post-2008. Conditional on exposure, the cap raises volatility and lowers alpha for high-intensity benchmark-huggers, but does the opposite for low-intensity managers. It also amplifies the top-tercile flow-performance slope, acting as a type-separating filter.