Increases CAPE Ratio Predictability with a Simple Adjustment
CAPE has long been a cornerstone of long-horizon return forecasting. Critics argue that its predictive power has faded in recent decades. This paper pushes back.
The Best Defensive Strategies: Two Centuries of Evidence
Which defensive strategies have actually worked, and do the conclusions survive when we evaluate them over multiple centuries rather than a few decades?
Fund Selection When Borrowing Is Restricted
Once borrowing is realistically restricted, the Sharpe ratio can stop lining up with what investors actually care about: utility. This paper argues that in this constrained world, the geometric mean is a better compass.
How AI Can Help Find the Needle in the Haystack
Artificial intelligence is rapidly transforming the investment landscape in ways that extend far beyond algorithmic trading and robo-advisors. One of AI's most promising applications lies [...]
Exploiting Myopia: The Returns to Long-Term Investing
Markets are often assumed to be efficient across horizons, with prices reflecting fundamentals regardless of who holds the asset or for how long. Recent research challenges this assumption by showing that the investment horizon of shareholders itself shapes prices and future returns.
The Stock Market and Bank Risk-Taking
While public listings are often viewed as a sign of strength, scale, or access to capital, recent research suggests a more subtle consequence: going public changes how banks take risk.
Retail Investors and the Mispricing Puzzle
Institutional investors are frequently spoken of in the finance literature as “smart money” while retail investors are considered “noise traders” who suffer from a variety [...]
Financial Regulation and AI: A Faustian Bargain?
Financial regulation has always faced a trade-off between simplicity and precision. Simple rules are transparent and robust, but often miss where risks actually build up. More sophisticated tools can be more precise, but they are harder to understand, harder to explain, and sometimes change behavior in unexpected ways.
The Secular Decline in Interest Rates and the Rise of Shadow Banks
Over the last 20 years, a massive shift has occurred, with "shadow banks"- non-depository institutions like Quicken Loans -capturing nearly half of all originations. While many attribute this to new technology or post-crisis rules, recent research reveals a deeper economic catalyst: the secular decline in interest rates..
Low-Cost Financing via Short Box Spreads: A Primer for Financial Advisors
It is well-known that box spreads offer investors the ability to lend via the options market at similar rates to Treasury Bills. But there is another, less popular side of the box spread market – borrowing money. This articles dives into the mechanics of how to use box spreads to borrow at low costs.
Retired Investors Should Stop Trading So Much
Retirement creates a sudden jump in leisure time. That should reduce information-processing barriers. The question is: does having more time change how people trade, and does it improve outcomes?
Do indexes time the market?
This paper shows there is a durable, stock-specific momentum component tied to how prices react to firm news around earnings dates. The result is a cleaner, lower-risk way to capture momentum without leaning so heavily on broad factor moves.
How Geopolitics is Being Priced in Real Time
By reading earnings calls and analyst reports at scale, algorithms can identify who is applying pressure, who is being targeted, which instruments are used, and how firms respond. The result is a new way to observe geopolitical risk as it actually enters corporate decision making.
The Hidden Risks of Leveraged Single-Stock ETFs
Leveraged ETFs function precisely as designed—they deliver leveraged exposure to daily returns, not long-term performance. Problems emerge when investors misuse these instruments for purposes they weren't built for, particularly buy-and-hold investing or long-term wealth accumulation.
Taming the Anomaly Zoo: How Macroeconomic Forces Shape Market Returns
Success lies not in collecting exotic anomalies like rare zoo specimens, but in understanding the economic forces that drive sustainable return patterns. Focus on strategies with solid macroeconomic foundations, maintain healthy skepticism about new discoveries, and always account for implementation costs.
Does regulation actually clean up bad behavior?
This paper explores how FINRA’s efforts to discipline “bad brokers” often lead to regulatory leakage—problematic advisors leaving one firm only to resurface elsewhere.
Institutions’ return expectations across assets and time
This paper shows how return expectations are formed: largely via a common “building-block” model (dividend yields, earnings growth, inflation, P/E changes), and how they vary across asset classes, time periods, and institutions.
Is Trend Following Better than “Buy the Dip”?
"Buy the dip" (BTD) has become one of the most popular investment mantras of recent years, especially since the COVID-19 market recovery in 2020. The strategy seems intuitive: when markets fall, buy at a discount and wait for the inevitable rebound. However, BTD is not foolproof. By design, it performs well when market declines are brief, but poorly when declines mark the beginning of a prolonged drawdown. A new paper from AQR Capital Management, “Hold the Dip,” examines the empirical evidence and puts this popular strategy to the test.
How costly are cultural biases? Evidence from FinTech
This paper examines how cultural biases affect high-stakes decisions in a FinTech setting, showing that even when information is the same, the social groups we prefer can lead us into worse outcomes. The result: bias isn’t just unethical, it’s expensive.
Policy news and stock market volatility
This paper builds a new measure of “equity market volatility” using newspaper articles and finds that policy-related news (fiscal, monetary, trade, regulation) explains a large share of volatility spikes.