Smart-beta (or factor) investing industry's assets under management have grown to over $1 trillion. We attempt to survey the merits and risks of this investment style from both professional investors' and academics' points of view. After reviewing academic papers, reports of practitioners in the...

Undiversifiable (or systematic risk) has long been an enemy of investors. Many countercyclical strategies have been developed to counter this. However, like all insurance types, these strategies are generally costly to implement, and over time can significantly reduce portfolio returns in long...

This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives...

Did the masculinity-driven corporate culture of Wall Street change after the 2008 global financial crisis? According to the neuroendocrinology literature, the voice pitch of a male is an ‘honest signal' of his testosterone level that affects risk taking for social dominance. We use digitally...

I use the global crisis of 1914 as a window onto the phenomenon of investor reaction to complex news — such as sudden political upheaval. Based on a novel database of all stocks traded on the NYSE during 1914, along with “real-time” news accounts from major newspapers, I show that NYSE...

This paper uses two economic shocks, a catastrophic earthquake, the Great East-Japan Earthquake, that hit Japan on March 11, 2011 and the pandemic in 2020, to determine if investors respond differently by the types of economic shocks. We analyze the factors affecting the abnormal returns during...

There has been a misleading revival of an old precept in Islamic finance - ‘no risk, no gain'- in the wake of the global financial crisis that started with the 2007 sub-prime debacle in the US. The recent proponents of the precept argue that the basic reason for the recurrence of such crises...

Based on qualitative empirical research, we examine the extent to which Central European emerging stock markets were affected by the recent international financial crisis, and how the current investment climate influences investments in Polish equities. We find that global financial crisis...

We study a continuous-time pure exchange economy where idiosyncratic cash flow risks are priced via investors' heterogeneous beliefs. Investors perceive idiosyncratic cash flow risks differently through heterogeneous subjective mean growth rates on a firm's cash flow. This impacts equilibrium...

We determine the optimal robust investment strategy of an individual who targets a given rate of consumption and who seeks to minimize the probability of lifetime ruin when she does not have perfect confidence in her hazard rate of mortality. By using stochastic control, we characterize the...