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Working Paper
Pricing Without Mispricing
July 16, 2021
We offer a novel test of whether an asset pricing model describes expected returns in the absence of mispricing. Our test assumes such a model assigns zero alpha to investment strategies using decade-old information. Prominent multifactor models do not satisfy this condition – while multifactor betas help capture current expected returns on mispriced stocks, persistence in those betas distorts the stocks' implied expected returns after prices correct.
Working Paper
Should Information be Sold Separately? Evidence from MiFID II
September 23, 2020
This paper investigates whether MiFID II, a European regulation that unbundles research from transactions, improves the efficiency of information production.
White Paper
Equity Term Structures without Dividend Strips Data
March 12, 2020
We use a large cross-section of equity returns to estimate a rich affine model of equity prices, dividends, returns and their dynamics.. The new term structure data generated by our model represent new empirical moments that can be used to guide and evaluate asset pricing models.
Working Paper
Economics with Market Liquidity Risk
September 19, 2019
We discuss the effects of market liquidity risk on asset pricing, investment management, corporate finance, banking, financial crises, macroeconomics, monetary policy, fiscal policy, and other economic areas.
Journal Article
A Framework for Identifying Accounting Characteristics for Asset Pricing Models, with an Evaluation of Book-to-Price
November 7, 2018
We provide a framework for identifying accounting numbers that indicate risk and expected return.
Interview
Words from the Wise: An Interview with Richard Thaler
July 27, 2018
Richard Thaler, a founding father of behavioral finance and the 2017 recipient of the Nobel Prize in Economics, discusses his pioneering research, including how our behaviors influence decision making and investing and what to do about it.
White Paper
Understanding the Volatility Risk Premium
May 11, 2018
The volatility risk premium (VRP) represents the compensation that investors earn for providing protection against market losses. We explain the reasons why it may exist and explore its historical performance with a simple option-selling strategy.
Journal Article
Sharpening the Arithmetic of Active Management
February 22, 2018
Does the dictum that the return to active management must equal that of passive management hold in the real world? This paper explores the assumptions and possible market impact.
Perspective
Wild but Not Crazy
February 15, 2018
Just how volatile was the recent market ride? Cliff Asness puts the volatility into perspective in terms of both its absolute and surprise levels.
Perspective
High-Frequency Derangement Syndrome
February 8, 2018
Commentators are still blaming the wrong strategies for the recent market rout.