Exposure to market risk is a core objective of the Capital Asset Pricing Model (CAPM) with a focus on systematic risk. However, traditional OLS Beta model estimations (Ordinary Least Squares) are plagued with several statistical issues. Moreover, the CAPM considers only one source of risk and...

A number of investors and portfolio managers are increasing the presence of alternative assets in their portfolios to a level close to traditional assets, harbouring the new frontiers in asset management research, including new risk premia, alternative beta, multifactor models. We build an...

We link a seemingly biased trading behavior to equilibrium asset prices. U.S. equity mutual fund managers tend to sell both their big winners and big losers. This selling pressure pushes down current prices and leads to higher future returns; aggregating across funds, we nd that securities for...

By choosing investment strategies that intentionally create exposure to factor betas, investors may be obtaining uncompensated risks. We show across a wide variety of factors and geographical markets that factors constructed from fundamental characteristics have earned high returns, whereas...

Much attention is paid to portfolio variance, but skewness is also important for both portfolio design and asset pricing. We revisit the empirical research on systematic skewness that we initiated 25 years ago. In an out-of-sample test, we find that the risk premium associated with skewness is...

Exposure to market risk is a core objective of the Capital Asset Pricing Model (CAPM) with a focus on systematic risk. However, traditional OLS Beta model estimations (Ordinary Least Squares) are plagued with several statistical issues. Moreover, the CAPM considers only one source of risk and...

Factors in prominent asset pricing models are positively autocorrelated. We derive a transformation that turns an autocorrelated factor to a ``time-series efficient'' factor. Time-series efficient factors earn significantly higher Sharpe ratios than the original factors and contain all the...

We develop and implement methods for determining whether introducing new securities or relaxing investment constraints improves the investment opportunity set for prospect investors. We formulate a new testing procedure for prospect spanning for two nested portfolio sets based on subsampling and...

I analyze the implications of allowing consumers to make mistakes on the risk-return relationships predicted by consumption-based asset pricing models. I allow for consumption mistakes using a model in which a portfolio manager selects a portfolio on a consumer's behalf. The consumer has an...

Using mutual fund flow, we empirically test whether choices made by investors are consistent with preferences implied by prospect theory. Our findings support this hypothesis. When allocating capital to mutual funds, investors evaluate funds based on the past performance distribution and choose...