In recent weeks and months, a number of market commentators have drawn comparisons between the prevailing economic landscape and previous financial crises, episodes and events. These have ranged from talk of a new ‘Volcker Shock’ to a repeat of the 1987 stockmarket crash, the dot.com burst...

This paper re-evaluates academic research on 92 cross-sectional stock return predictors. Researchers studying return predictability must make decisions about portfolio construction; for example, whether to rebalance annually or monthly. In sample, the returns of predictor portfolios constructed...

Stocks with high net gamma exposure robustly underperform stocks with low net gamma exposure by 10% per year. This effect is distinct from multiple previously documented return predictors, and survives many robustness checks. We show that stocks with low net gamma exposure negatively predicts...

This study clarifies the mechanism for factor-beta anomalies (i.e., non-zero cross-sectional factor beta-alpha relationships) to emerge under a standard factor-model framework. The explicit modeling generates the following findings. First, factor-beta anomalies do not challenge the...

This study shows that the low-beta anomaly (LBA) is observed because market betas estimated by empiricists, besides capturing the market risk, also capture other factors. Under this framework, I further find that the economic content of LBA is changeable as two types of factors can induce LBA:...

Duration is an important parameter used by investors to choose between different investment opportunities in financial economics. While the concept of duration is usually associated with fixed-income assets, its expansion to the equity assets is becoming more relevant in the recent period, due...

Climate change is making resources scarce, and our investments to build a new net-zero world are driving an insane demand for resources. This leaves the world economy caught between a rock and a hard place. Using a bankruptcy model with conservative estimates of the impact, we estimate public...

This paper applies a Bayesian break method to studying the empirical time-varying relations between stock price ratios and subjective expectations across the market and 30 industry portfolios monthly from 1976 to 2020. Cash flow expectations unconditionally explain 80% of price variations since...

The bedrock of financial economics is that there should be a tradeoff between risk and reward: an investment with low risk should have a low expected return, while one that could make you rich should also be one which could lose you a lot of money. A lot of research in finance is focused on...

Most literature that labels certain behavior as “irrational” ignores the etymology of the word “rational.” To be “rational” is to be proportionate (i.e., in a ratio). The question is, “proportionate to what?” To label behavior as irrational is to assert that the behavior is not...