We propose a new measure of investor disagreement based on thirty-nine factors from the return-predicting anomaly literature. Consistent with theoretical work on volume, we show that a one standard deviation change in anomaly-based disagreement is associated with a 16.7% higher turnover in the...

We construct a zero-net-worth uninformed "naive investor" who uses a random portfolio allocation strategy. We then compare the returns of the momentum strategist to the return distribution of naive investors. For this purpose we reward momentum profits relative to the return percentiles of the...

In this note we revisit the 2011 and 2013 papers of Blitz, Huij, and Martens (BHM2011), and Blitz, Huij, Lansdorp, and Verbeek (BHLV2013) in which momentum and reversal strategies on residual returns are proposed. Our results indicate that the main findings of these studies, that residual...

This paper identifies a clear tradeoff between tracking error — performance differences relative to a targeted asset allocation — and turnover—a proxy for rebalancing costs — that can help guide investors’ rebalancing choices. We find that calendar-based approaches, while convenient,...

Investor sentiment is an important condition for style investing in affecting asset price predictability. We find that style returns have predictive power for future stock returns in high sentiment periods, but not low sentiment periods. The correlation between style returns and stock returns...

We study the tradeoff between direct and indirect stock investments through equity mutual funds for a utility-maximizing investor. Whereas direct investments impose higher transaction costs on the formation of a well-diversified portfolio, mutual funds charge fees for their services. Our results...

We build a macroeconomic model for Switzerland, the Euro Area, and the USA that drives the dynamics of several asset classes and the liabilities of a representative Swiss (defined-contribution) pension fund. This encompassing approach allows us to generate correlations between returns on assets...