We propose a new way to conduct multiple hypothesis testing in economics research. Our framework allows for correlation among tests and incomplete data, both of which are prevalent in economic meta-analysis. Our simulations show that that our method is able to produce the correct p-value cutoff...

The multiple testing problem plagues many important issues in finance such as fund and factor selection. Many look good purely by luck. There are a number of statistical techniques to control for multiplicity that reduce Type I errors - but it is unknown by how much. We propose a new way to...

We present a framework for modeling and estimating dynamics of variance and skewness from time-series data using a maximum likelihood approach assuming that the errors from the mean have a non-central conditional t distribution. We parameterize conditional variance and conditional skewness in an...

Identifying the factors that drive the cross-section of expected returns is challenging for at least three reasons. First, the choice of testing approach (time-series versus cross-sectional) will deliver different sets of factors. Second, varying test portfolio sorts changes the importance of...

Traditional mean-variance efficient portfolios do not capture the potential wealth creation opportunities provided by predictability of asset returns. We propose a simple method for constructing optimally managed portfolios that exploits the possibility that asset returns are predictable. We...

We analyze the history of the equity risk premium from surveys of U.S. Chief Financial Officers (CFOs) conducted every quarter from June 2000 to March 2015. The risk premium is the expected 10-year S&P 500 return relative to a 10-year U.S. Treasury bond yield. We show that the equity risk...

Hundreds of papers and hundreds of factors attempt to explain the cross-section of expected returns. Given this extensive data mining, it does not make any economic or statistical sense to use the usual significance criteria for a newly discovered factor, e.g., a t-ratio greater than 2.0....

We analyze the history of the equity risk premium from surveys of U.S. Chief Financial Officers (CFOs) conducted every quarter from June 2000 to June 2016. The risk premium is the expected 10-year S&P 500 return relative to a 10-year U.S. Treasury bond yield. The average risk premium in 2016,...

Factor investing has failed to live up to its many promises. Its success is compromised by three problems that are often underappreciated by investors. First, many investors develop exaggerated expectations about factor performance as a result of data mining, crowding, unrealistic trading cost...

Impact costs occur when large buy or sell orders move market prices. The measurement of these costs is crucial for the evaluation of potential trading strategies as well as the successful execution of systematic investment strategies. However, common approaches suffer from a type of myopia:...