The growing dominance of the core and explore model – a large passive index combined with a collection of high tracking error satellite portfolios – in conjunction with the growth of factor investing has renewed interest in how to allocate among different equity strategies. We study this...

I introduce a method of portfolio selection based on the idea that investment risk is not having enough wealth when you need it. Not having enough wealth translates into a required return. When you need wealth translates into an investment horizon. These two ingredients, when combined with...

Conventional wisdom holds that multiperiod portfolio optimization problems are best, if not only, solved by dynamic programming. But dynamic programming suffers from the curse of dimensionality whereby optimization becomes intractable as time horizon and number of assets increase, thereby...

Basic volatility and predictability characteristics of the aggregate US stock market over the last century can be understood in terms of the dynamic properties of mean reverting equity discount rates. Additionally, high prices in good times and low prices in bad times can be understood in terms...

Using a simple model of equity valuation, we de fine stock market bubbles and anti-bubbles as periods in which the dynamics of valuation is temporarily explosive. We identify a mechanism for the creation and destruction of bubbles and anti-bubbles that depends on the interaction between...

A no-arbitrage pricing model with inflation as the only priced risk factor explains the bond, equity, and value premia observed in the United States over the past sixty years. Even though inflation is the only priced factor, in an economy with three state variables -- inflation, the real rate,...

The Post-Earnings Announcement Drift (PEAD) anomaly refers to the tendency of stock prices to continue drifting in the same direction as earnings surprises well through the subsequent earnings announcements; ignoring the autocorrelations in extreme earnings surprises across adjacent quarters....