This material was presented at the 3rd Frontiers of Factor Investing Conference at Lancaster, England.When assets' expected returns follow a factor structure subject to pricing errors, we show that the mean-variance portfolio can be used to obtain a set of implied factor risk premia. Contrary to...

We estimate the costs of financial distress prior to default (pre-default costs) separately from the loss incurred at default (the loss given default) using a dynamic trade-off model of capital structure. We document that pre-default costs are on average equal to 6.5% of firm value per year. We...

We develop a dynamic capital structure model to study how manager-shareholders agency conflicts affect the joint determination of financing and investment decisions. We show that the consumption of private benefits channel leads managers not only to choose a lower optimal leverage, but also to...

Long-term investors rebalance their portfolios given their views on the investment landscape. Portfolio tilting is often implemented using investors' views on point estimates of asset expected returns which are notoriously difficult to estimate and lead to unstable portfolio weights. We avoid...