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Working Paper
Embedded Leverage
November 1, 2012
Embedded leverage—the amount of market exposure per unit of committed capital—has become an important feature of financial instruments. We study embedded leverage in equity options, index options and ETFs, and how it affects the required returns.
Working Paper
The Earnings Announcement Premium and Trading Volume
May 1, 2007
We measure and provide explanation for the earnings announcement premium, when stock prices rise around scheduled earnings announcement dates. We show that the premium is large and strongly related to the surge in volume around announcement dates.
Journal Article
Leverage Aversion and Risk Parity
January 1, 2012
In recent years, a new approach to asset allocation called risk parity (RP) has been gaining in popularity among practitioners.
Journal Article
Sell-Side School Ties
August 1, 2010
In the equities market, security analysts are among the most important agents in revealing information to investors.
Journal Article
The Small World of Investing: Board Connections and Mutual Fund Returns
May 1, 2007
Information moves security prices.
Journal Article
Betting Against Beta
January 1, 2014
A basic premise of the capital asset pricing model (CAPM) is that all agents invest in the portfolio with the highest Sharpe ratio, or expected excess return per unit of risk, and leverage or de-leverage this portfolio to suit their risk preferences. However, many investors — such as individuals, pension funds and mutual funds — are constrained in the leverage that they can take, and therefore overweight risky securities instead.
Journal Article
Buffett's Alpha
November 1, 2013
[Winner of the CFA Institute's 2018 Graham and Dodd Award] What is the secret to Warren Buffett's success? We seek the answer via a thorough empirical analysis in light of some the latest research on the drivers of returns.
Journal Article
Economic Links and Predictable Returns
August 1, 2008
This paper provides evidence that investors often fail to consider economic links between companies when making investment decisions and this phenomenon can have a substantial effect on asset prices.
Journal Article
Betting Against Correlation: Testing Theories of the Low-Risk Effect
February 15, 2017
What drives the low-risk effect? We test whether it's driven by leverage constraints (and thus risk should be measured using beta) or behavioral effects (and thus risk should be measured by idiosyncratic risk).
White Paper
Understanding Defensive Equity
July 1, 2012
This paper analyzes the intuition behind defensive equity. We then analyze the empirical evidence, construction and performance of defensive equity portfolios, and discuss the possible explanations for its historical outperformance.