We study the out-of-sample performance of portfolio trading strategies when an investor faces capital gain taxation and proportional transaction costs. Under no capital gain taxation and no transaction costs, we show that, consistent with DeMiguel, Garlappi, and Uppal (2009), a simple 1/N...

We show analytically and empirically that the positive abnormal returns from Betting-Against-Beta (BAB) – a beta-neutral portfolio long in low beta stocks and short in high beta stocks – are consistent with market segmentation due to costly information acquisition, as in Merton (1987)....

This paper documents that momentum profits in corporate bonds prevail during weakening aggregate credit conditions, and are driven by losers. Consistent with this, we find that a conditional default factor explains the cross-section returns of corporate bond portfolios sorted by past...

In this paper, we explain momentum profits using innovations in aggregate economy-wide default risk. First, we show that momentum returns are positive only during high default shocks and nonexistent otherwise. Second, we present evidence suggesting that a conditional default shock factor is...