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Journal Article

Betting Against Beta

January 1, 2014 - Andrea Frazzini Lasse H. Pedersen

A basic premise of the capital asset pricing model (CAPM) is that all agents invest in the portfolio with the highest Sharpe ratio, or expected excess return per unit of risk, and leverage or de-leverage this portfolio to suit their risk preferences. However, many investors — such as individuals, pension funds and mutual funds — are constrained in the leverage that they can take, and therefore overweight risky securities instead.

Journal Article

A Century of Evidence on Trend-Following Investing

November 1, 2017 - Brian K. Hurst Yao Hua Ooi Lasse H. Pedersen

We simulate a trend-following strategy back to 1880 and investigate whether strong performance over a few decades was a statistical fluke, or a more robust phenomenon that may hold true over a wide range of economic conditions.

Journal Article

Regulating Systemic Risk

May 1, 2009 - Viral V. Acharya Lasse H. Pedersen Thomas Philippon Matthew P. Richardson

Systemic risk is the risk that the failure and distress of a significant part of the financial sector reduces the availability of credit which in turn may adversely affect the real economy.

Working Paper

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).

Journal Article

Adverse Selection and the Required Return

January 1, 2004 - Nicolae Gârleanu Lasse H. Pedersen

Securities are traded by buyers and sellers with different levels of knowledge about those securities.

Working Paper

Deep Value

December 4, 2017 - Cliff Asness John M. Liew Lasse H. Pedersen Ashwin Thapar

We examine the efficacy of a hypothetical deep value strategy—where the valuation spread between cheap and expensive securities is wide relative to its history—across global asset classes and also provide new evidence on competing theories for the value premium.

Journal Article

Value and Momentum Everywhere

June 1, 2013 - Cliff Asness Tobias J. Moskowitz Lasse H. Pedersen

We find consistent value and momentum return premia across eight diverse markets and asset classes, and a strong common factor structure among their returns.

Journal Article

Demand-Based Option Pricing

February 25, 2009 - Nicolae Gârleanu Lasse H. Pedersen Allen M Poteshman

Index and equity options are notoriously difficult to price.

Journal Article

Carry

November 7, 2013 - Ralph S. J. Koijen Tobias J. Moskowitz Lasse H. Pedersen Evert B. Vrugt

An asset’s “carry” is its expected return assuming that market conditions, including its price, stay the same. We find that carry predicts returns both in the cross section and time series for a variety of different asset classes.

Journal Article

Buffett's Alpha

November 1, 2013 - Andrea Frazzini David G. Kabiller Lasse H. Pedersen

[Winner of the CFA Institute's 2018 Graham and Dodd Award] What is the secret to Warren Buffett's success? We seek the answer via a thorough empirical analysis in light of some the latest research on the drivers of returns.