There is a myriad of financial anomalies in the cross-section of equity returns. They have been widely studied in the literature, which gives investors a large choice in terms of investment styles. In this paper, the authors show a perhaps unappreciated quality of financial anomalies: they...

Investor aversion to extreme losses may motivate them to seek out investments perceived to function as a safe haven during times of crisis. In this study, we consider the potential for precious metals to mitigate downside risk when combined with equities, and evaluate the impact on portfolio...

This paper investigates the impact of Brexit events on the behaviour of 34 financial indices from 1st January 2012 to 26th April 2017. Our focus is to evaluate whether the impact of Brexit on financial markets is consistent with rational asset pricing models. The empirical research uses a...

We give an explicit algorithm and source code for constructing risk models based on machine learning techniques. The resultant covariance matrices are not factor models. Based on empirical backtests, we compare the performance of these machine learning risk models to other constructions,...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

We establish that the risk-return tradeoff of cryptocurrencies (Bitcoin, Ripple, and Ethereum) is distinct from those of stocks, currencies, and precious metals. Cryptocurrencies have no exposure to most common stock market and macroeconomic factors or to the returns of currencies and...

There have been increasingly frequent claims that risk parity strategies are hiding an implicit short volatility exposure or behave as though they are short volatility. In order to test the veracity of these claims, we simulate stylized versions of three-asset-class (equity, fixed income, and...

This paper proposes a framework that decomposes the market risk into three components: upside, downside, and tail risk. Their risk premiums can be estimated using information from either the index options market or the stock market. The estimated premiums from both markets share two important...

We propose a protocol for identifying genuine risk factors. The underlying premise is that a risk factor must be related to the covariance matrix of returns, must be priced in the cross-section of returns, and should yield a reward-to-risk ratio that is reasonable enough to be consistent with...

Current factor models do not identify risks that matter to investors. To address this issue, we provide a factor model implementation of the ICAPM, which captures market risk and intertemporal risk (i.e., changes in long-term expected returns and volatility). We build our intertemporal risk...