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Working Paper

Rationality and Risk Intelligence in Binary Betting

We seek to answer two questions about people who bet on financial-market outcomes: Do they have skill? Do they have risk intelligence? We analyzed a data set of 1.6 million bets to find out.

Working Paper

The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?

Entrepreneurs tend to concentrate investments in private equity. However, research shows that private equity returns are generally no higher than the market return on all publicly traded equity. We delve into explanations for this here.

Working Paper

When Is Bargaining Successful? Negotiated Division of Tournament Prizes

High-stakes poker players often negotiate the distribution among a small number of finalists rather than playing through until only one player remains. We find that this setting is ideal for studying bargaining—this paper documents our findings.

White Paper

The Case for Momentum Investing

Although a powerful investment style, momentum was largely unavailable to many investors. The introduction of the AQR Momentum Indices has been a pivotal development in momentum’s acceptance as an investment strategy.

Working Paper

Decision-Making Under the Gambler's Fallacy

Reviewing decisions made by judges, loan officers and umpires in high-stakes contexts, we find them to be most consistent with the "gambler's fallacy"—meaning they were based as much on their own previous decisions as on the facts they were weighing.

Working Paper

Follow the Leader: Peer Effects in Mutual Fund Portfolio Decisions

This paper demonstrates that mutual funds “follow the leaders"—Trades of well-performing funds are statistically and economically important determinants of subsequent portfolio decisions of the remaining managers.

Journal Article

The Pitfalls of Leveraged and Inverse ETFs

As market volatility reaches historic highs, investors have responded in various ways, including investing in funds that aim to deliver returns that are either a positive or inverse multiple of a stated index.

Journal Article

A Historical Perspective on Time-Varying Expected Returns

Investors naturally think about the expected returns of bonds based on their market yields, thus assuming time-varying expected returns.

Interview

Words from the Wise: An Interview with Richard Thaler

Richard Thaler, a founding father of behavioral finance and the 2017 recipient of the Nobel Prize in Economics, discusses his pioneering research, including how our behaviors influence decision making and investing and what to do about it.