The equity risk premium is generally considered to be a reward that investors earn on top of the prevailing risk-free return, implying that, all else equal, total expected stock returns should increase with the level of the risk-free return. We examine whether this notion is true using long-term...

We examine how divesting from fossil fuel stocks, as announced by several large institutional investors, affects the systematic risk exposures of an equity portfolio. We find that fossil fuel stocks exhibit a highly significant positive exposure towards changes in the oil price. Consistent with...

We examine the effects of incorporating a potential tax on carbon emissions into a value investment strategy. We show that in a portfolio optimization problem, a carbon tax at the stock level is mathematically equivalent to a carbon constraint at the portfolio level. Using this insight we derive...

Short-term alpha signals are generally dismissed in traditional asset pricing models, primarily due to market friction concerns. However, this paper demonstrates that investors can obtain a significant net alpha by combining signals applied on a liquid global universe with simple buy/sell...

The emerging literature suggests that machine learning (ML) is beneficial in many asset pricing applications because of its ability to detect and exploit nonlinearities and interaction effects that tend to go unnoticed with simpler modelling approaches. In this paper, we discuss the promises and...

Machine learning (ML) models for predicting stock returns are typically trained on one-month forward returns. While these models show impressive full-sample gross alphas, their performance net of transaction costs post 2004 is close to zero. By training on longer prediction horizons and using...

This paper examines the sustainability characteristics of listed firms that raise fresh capital by issuing stocks or bonds. Issuance, i.e. the primary market, should be of paramount importance to sustainable investors since this is where the demand for and supply of capital meet, contrary to the...