We propose a unique dynamic portfolio construction framework that improves portfolio performance by adjusting asset allocation in accordance with a forecast of market risk. We find that modifying asset allocation according to our market risk barometer offers investors the promising opportunity...

Previous research attributes long-run reversals to investor over-reaction or tax-motivated trading; we offer an alternative explanation based on aggregate funding conditions. Our evidence shows that prices rebound for stocks that have performed poorly over the past several years (Losers);...

We find strong evidence linking the momentum pattern in equity returns with a prominent measure of macroeconomic conditions, specifically the funding environment. We show that the size and consistency of the momentum premium varies systematically across funding states. Furthermore, we find...

Operating leverage (OL) and profitability are interrelated determinants of stock returns. We show that the outperformance of firms with high OL is driven by periods of unconstrained aggregate funding conditions. Firms with high OL are more risky in general, but when the Fed eases funding...

We use an international sample of 20 developed countries to test theories predicting an association between operating leverage with stock returns and the value premium. Results suggest that operating leverage is related to stock returns and the value premium across the sampled countries. These...

Using a sample of stocks experiencing large price changes in 40 countries over 20 years, we investigate the association between investors' traits that vary by national culture – overconfidence, conservatism, and risk tolerance – and proposed theoretical explanations for short-term equity...

Using idiosyncratic volatility as a proxy for arbitrage costs, the authors found that the highly publicized accrual and asset growth anomalies exist because of high barriers to arbitrage, occurring predominantly in the universe of stocks with higher arbitrage risks. Therefore, investors who seek...