Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

This paper examines the exposures of low-volatility portfolios to various sources of systematic risk. Our analysis includes interest rate, implied volatility, liquidity, commodity, sentiment, macroeconomic, and climate risk factors. We find that low-volatility portfolios lower the exposure to...

Contrary to the intuition that the standard risk-return tradeoff should lead to underperformance of a portfolio that scales down exposure during volatile periods a recent paper by Moreira and Muir (2017) actually shows that volatility-managed portfolios produce robust and significant alphas. The...

Several studies have attributed the high excess returns of the momentum strategy in the equity market to investor behavioral biases. However, whether momentum effects occur because of investor underreaction or because of investor overreaction remains a question. Using a simple model to...

Although there is an extensive literature on the impact of volatility on asset returns correlation, investigating this in relation to broad asset selection and in perspective of different timelines has received less attention. In comparison to the previous papers, we use a much broader set of 35...

Oil is perceived as a good diversification tool for stock markets. To fully understand this potential, we propose a new empirical methodology that combines generalized autoregressive score copula functions with high frequency data and allows us to capture and forecast the conditional...

We use 92,632,873 daily returns for 33,010 US firms to establish the best forecasting model for realized idiosyncratic variances. Comparing forecasts from 10 different models, we find that the most popular models, the martingale and GARCH type models, perform worst. Using the...

Momentum is one of the largest and most pervasive market anomalies. However, despite a high mean and Sharpe ratio, momentum suffers from large negative skewness that comes from momentum crash periods. These crashes occur in times of both market stress and market rebound and thus variables that...