Frazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that...

Implied expected returns are the expected returns for which a supposedly mean-variance efficient portfolio is effectively efficient given a covariance matrix. We analyze the statistical properties of monthly implied expected return estimates and study their sensitivity to the choice of a...

In this paper, we forecast industry returns out-of-sample using the cross-section of book-to-market ratios and investigate whether investors can exploit this predictability in portfolio allocation. Cash-flow and return forecasting regressions show that cross-industry book-to-market ratios...

We show that geographical variation in the level of investor sophistication influences local asset prices. Investors in less sophisticated regions exhibit stronger trading correlations, and correspondingly, the returns of firms headquartered in less sophisticated areas are more strongly...

We link a seemingly biased trading behavior to equilibrium asset prices. U.S. equity mutual fund managers tend to sell both their big winners and big losers. This selling pressure pushes down current prices and leads to higher future returns; aggregating across funds, we nd that securities for...