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Journal Article

Betting Against Correlation: Testing Theories of the Low-Risk Effect

February 15, 2017 - Cliff Asness Andrea Frazzini Niels Joachim Gormsen Lasse H. Pedersen

What drives the low-risk effect? We test whether it's driven by leverage constraints (and thus risk should be measured using beta) or behavioral effects (and thus risk should be measured by idiosyncratic risk).

Working Paper

Two Monetary Tools: Interest Rates and Haircuts

May 1, 2011 - Nicolae Gârleanu Lasse H. Pedersen

What happens when financial institutions, which play a key role as credit providers in the economy, become financially constrained themselves? This paper studies the ramifications during a liquidity crisis.

Working Paper

Economics with Market Liquidity Risk

September 19, 2019 - Viral V. Acharya Lasse H. Pedersen

We discuss the effects of market liquidity risk on asset pricing, investment management, corporate finance, banking, financial crises, macroeconomics, monetary policy, fiscal policy, and other economic areas.

Working Paper

Responsible Investing: The ESG-Efficient Frontier

October 10, 2019 - Lasse H. Pedersen Shaun Fitzgibbons Lukasz Pomorski

Combining several large data sets, we compute the empirical ESG-efficient frontier and show the costs and benefits of responsible investing.

Working Paper

Risk Everywhere: Modeling and Managing Volatility

January 26, 2016 - Tim Bollerslev Benjamin Hood John J. Huss Lasse H. Pedersen

This paper finds similarities in realized volatility patterns across assets and asset classes, based on a high-frequency dataset for more than 50 commodities, currencies, equity indices and fixed income instruments spanning more than two decades.

Working Paper

Repeated Auctions With Endogenous Selling

February 1, 2003 - Nicolae Gârleanu Lasse H. Pedersen

Auction theory studies the expected revenue to an owner committed to selling—as when a government sells an oil field, where the sale decision is unrelated to its quality. This paper addresses questions raised by auctions where owners choose to sell.

Working Paper

Generalized Recovery

March 1, 2016 - Christian Skov Jensen David Lando Lasse H. Pedersen

We shed new light, both theoretically and empirically, on the Holy Grail in financial economics: decoding probabilities and risk preferences from asset prices.

Journal Article

Quality Minus Junk

October 9, 2013 - Cliff Asness Andrea Frazzini Lasse H. Pedersen

We show that a quality-minus-junk (QMJ) factor that goes long high-quality stocks and shorts low-quality stocks earns significant risk-adjusted returns in the U.S. and globally. Also, controlling for quality resurrects the otherwise moribund size effect.

Journal Article

Efficiently Inefficient Markets for Assets and Asset Management

September 21, 2015 - Nicolae Gârleanu Lasse H. Pedersen

We consider a model where investors can invest directly or search for an asset manager, information about assets is costly. If investors can find managers more easily, more money is allocated to active management, fees are lower, and asset prices are more efficient.

Working Paper

Early Option Exercise: Never Say Never

March 18, 2016 - Mads Vestergaard Jensen Lasse H. Pedersen

A classic rule in financial economics: Never exercise a call option and never convert a convertible bond, except just before expiration or dividend payments. This paper shows how this rule breaks down when financial frictions are introduced.