Machine learning (ML) models for predicting stock returns are typically trained on one-month forward returns. While these models show impressive full-sample gross alphas, their performance net of transaction costs post 2004 is close to zero. By training on longer prediction horizons and using...

The emerging literature suggests that machine learning (ML) is beneficial in many asset pricing applications because of its ability to detect and exploit nonlinearities and interaction effects that tend to go unnoticed with simpler modelling approaches. In this paper, we discuss the promises and...

Conventional short-term reversal strategies exhibit dynamic exposures to the Fama and French (1993) factors. We develop a novel reversal strategy based on residual stock returns that does not exhibit these exposures and consequently earns risk-adjusted returns that are twice as large as those of...

We examine the empirical relation between risk and return in emerging equity markets and find that this relation is flat, or even negative. This is inconsistent with theoretical models such as the CAPM, which predict a positive relation, but consistent with the results of studies for developed...

This paper shows that low-risk stocks significantly outperform high-risk stocks in the local China A-share market. The main driver of this low-risk anomaly is volatility, and not beta. A Fama–French style VOL factor is not explained by the Fama–French–Carhart factors, and has the strongest...

This paper examines the sustainability characteristics of listed firms that raise fresh capital by issuing stocks or bonds. Issuance, i.e. the primary market, should be of paramount importance to sustainable investors since this is where the demand for and supply of capital meet, contrary to the...

We explore the cross-section of factor returns using a sample of 150+ equity factors. Most factors exhibit a positive premium and a negative market beta in the long run. Factor themes with a clear positive beta, in particular low leverage and size, have no alpha after controlling for this beta...

In this paper we examine global tactical asset allocation (GTAA) strategies across a broad range of asset classes. Contrary to market timing for single asset classes and tactical allocation across similar assets, this topic has received little attention in the existing literature. Our main...

In this paper we critically examine the novel concept of fundamental indexation. We argue that fundamental indexation is by definition nothing more than an (elegant) value strategy, because the weights of stocks in a fundamental index and a market capitalization-weighted index only differ as a...

We propose a practical investment framework for dynamic asset allocation across different economic regimes, which we illustrate using a sample of U.S. data from 1948 to 2007. We identify four regimes in the economic cycle and find that these regimes capture pronounced time-variation in the risk...