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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.

Journal Article

Quality Minus Junk

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.

Working Paper

Balance Sheet Information and Future Stock Returns

A 2004 paper by Hirshleifer, Hou, Teoh and Zhang argues that measuring the level of net operating assets is a superior predictor of a company's future earnings and stock returns. Here, we point out how their claim may be misleading.

Working Paper

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

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

Overinvestment of Free Cash Flow

This paper focuses on using accounting information to better explain the relationship between free cash flow and overinvestment.

Journal Article

Corporate Governance, Accounting Outcomes and Organizational Performance

The purpose of this paper is to start the process of developing reliable and valid measures to assess how corporate governance affects corporate performance.

White Paper

Are Defensive Stocks Expensive? A Closer Look at Value Spreads

Investors have been concerned about the rich valuation of defensive stocks and how that may crimp returns. Using value spreads, we analyze the relative prices of defensive stocks and discuss the difficulties in predicting style returns.

Bibliography

Defensive Equity Bibliography

We have compiled a list of books, journal articles and working papers that were helpful in developing our research around defensive equity investing.

Journal Article

Size Matters, If You Control Your Junk

When it comes to equity investing, size matters—and in a bigger way than once thought—but only when controlling for junk. We examine seven challenges that have been hurled at the size effect and dismantle each one by controlling for a firm's quality.

Journal Article

Why Are Earnings Kinky? An Examination of the Earnings Management Explanation

An empirical regularity documented by Hayn (1995) is that there is a ‘‘kink’’ in the earnings distribution: too few firms report small losses and too many firms report small profits.