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SNAFU: Situation Normal, All-FANGed Up

Cliff tackles a story making the rounds about stock market performance in 2015. Was it, in fact, very “narrow” and driven by the “FANG” stocks (Facebook, Amazon, Netflix and Google)?


It Ain't What You Don't Know That Gets You Into Trouble

My colleagues have written two papers questioning things we thought we knew. The first questions what we really know about current stock market valuations forecasting long-horizon future returns and the second explores whether or not the size effect really exists.


Virtue Is its Own Reward: Or, One Man’s Ceiling Is Another Man’s Floor

We examine negative screening in Environmental, Social, and Governance (ESG) investing, often promoted as virtuous because it avoids “sin stocks” and other assets deemed undesirable. But does it also enhance expected returns?


Is (Systematic) Value Investing Dead?

When value has underperformed for so long, it’s natural and proper that people wonder if it’s ever going to work again. To test the popular explanations for why value investing is “broken,” Cliff tweaks the value factor’s construction to remove the stocks that best fit these stories. He finds no “this time is different” explanation holds water, affirming our belief that the medium-term odds are rather dramatically on value’s side.

Journal Article

Optimal Currency Hedging for International Equity Portfolios

We explore currency exposures in international equity portfolios by decomposing the optimal currency portfolio into a “hedge portfolio,” which minimizes equity volatility, and an “alpha seeking portfolio” based on the well-documented currency styles of value, momentum and carry.

Working Paper

The Dynamic Relation Between Stock Returns and Key Financial Ratios

This paper investigates how much variation of unexpected stock returns is explained by the variation of ratios related to a firm's product market strategy versus by the variation of ratios related to its financial market strategy.

Working Paper

Earnings Quality and Financial Reporting Credibility: An Empirical Investigation

Firms with extremely high accruals experience subsequent reductions in earnings and are more likely to be subject to SEC enforcement actions. Do analysts anticipate the earnings reductions in their forecasts? We investigate here.

Working Paper

Does Credible Mean Reliable?

Are independent revaluations more reliable than those conducted by corporate directors? We examine whether high quality independent valuers provides a credible evaluation about the underlying reliability of recognized asset revaluations.

Working Paper

Do Short Sale Transactions Precede Bad News Events?

It's argued that short sellers are a sophisticated subset of investors given the relative costs of short selling, and prior research suggests that short sellers are, on average, able to predict lower future performance. We test these assertions here.

Working Paper

Do Appearances Matter?

It is often assumed that mergers are accretive to a firm’s future earnings-per-share. We review 224 mergers and acquisitions, to find any relation between EPS accretion and both announcement and long-term abnormal returns for acquiring firms.