We provide first empirical evidence of the long-term realized performance of alternative beta strategies. Despite diversified risk premia portfolios achieving satisfactory Sharpe ratios of 0.80 – 1.07 over the past decade, we show that up to two thirds of the performance can be explained by...

Many asset pricing models consider ‘disagreement’ (heterogeneous expectations), while a variety of other asset pricing models focus on ‘tastes’ (preferences beyond risk aversion); yet relatively few asset pricing models simultaneously consider both. The Popularity Asset Pricing Model...

Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

We examine how expertise of institutional investors (aka deft investors), based on the product market similarity of their 13F holdings, is related to asset prices. We find that portfolio similarity of investors is associated with returns both at the extensive and intensive margins. A long-short...

We investigate the effect of ETF ownership on stock market anomalies and market efficiency. We find that low ETF ownership stocks exhibit higher returns, greater Sharpe ratios, and highly significant alphas in comparison to high ETF ownership stocks. We show that high ETF ownership stocks...

A growing literature uses portfolio holdings data to quantify the impact of investor demand on equilibrium prices via counterfactual experiments. The key parameter in relating demand and equilibrium prices is investors’ elasticity of demand with respect to the price. Unlike previous studies,...

The incentive contracts of delegated investment managers may have unintended negative consequences for asset prices. I show that managers who are compensated for relative performance optimally shift their portfolio weights towards those of the benchmark when volatility rises, putting downward...

We investigate the information source of active U.S. equity mutual funds’ value added using 234 public asset pricing anomalies. On average, mutual funds add value through their positive exposures to anomalies based on market information (e.g., momentum and liquidity risk) and lose value...

This chapter provides a perspective on the rapidly developing literature on investment performance evaluation. I use the stochastic discount factor approach to present and critique current performance measurement techniques in a unified setting. I offer a number of suggestions to improve...

We investigate the relationship between a mutual fund’s variation in systematic risk factor exposures and its future performance. Using a dynamic state space version of Carhart (1997)’s four factor model to capture risk factor variation, we find that funds with volatile risk factor exposures...