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Working Paper

Causes and Consequences of Margin Levels in Futures Markets

Using a Freedom of Information Act request, we obtained a data set on margin requirements for 16 commodity futures contracts, and used it to explore how margins are set and to test the existing theories on the implications of changing margin levels.

Working Paper

Robust Dynamic Asset Allocation With Model Misspecification

This paper derives the optimal dynamic trading strategy when the investor's model of alpha-decay is misspecified. This robust trading strategy can be computed easily by solving a standard linear quadratic Gaussian dynamic programming problem.

Working Paper

Time-Varying Leverage Demand and Predictability of Betting-Against-Beta

We test the predictability of betting-against-beta (BAB) strategies and find that they perform better when past market returns have been high.

Working Paper

Estimating the Risk-Return Trade-Off With Overlapping Data Inference

When empirically testing the predictions of a model, one must choose the horizon over which the agents in the model hold their investments. We show how to lower the standard errors of the estimates and improve the power of the tests of the theories.

Working Paper

Measuring the Risk-Return Trade-Off With Time-Varying Conditional Covariances

We explore strategies for estimating the price of risks in Merton’s intertemporal capital asset pricing model (ICAPM). Prior literature finds insignificant estimates of the risk-return tradeoff when using only the market return—but we find otherwise.