We present a model with leverage and margin constraints that vary across investors and time. We find evidence consistent with each of the model’s five central predictions: (1) Since constrained investors bid up high-beta assets, high beta is associated with low alpha, as we find empirically for U.S. equities, 20 international equity markets, Treasury bonds, corporate bonds, and futures; (2) A betting-against-beta (BAB) factor, which is long leveraged low beta assets and short high-beta assets, produces significant positive risk-adjusted returns; (3) When funding constraints tighten, the return of the BAB factor is low; (4) Increased funding liquidity risk compresses betas toward one; (5) More constrained investors hold riskier assets.

Betting Against Beta

/pdf/value-and-momentum-everywhere-value-and-momentum-everywhere-4c8fblmeeh.pdf

Value and Momentum Everywhere: Value and Momentum Everywhere

http://docs.lhpedersen.com/BettingAgainstBeta.pdf

Betting against beta

We study the out-of-sample and post-publication return predictability of 97 variables shown to predict cross-sectional stock returns. Portfolio returns are 26% lower out-of-sample and 58% lower post-publication. The out-of-sample decline is an upper bound estimate of data mining effects. We estimate a 32% (58%–26%) lower return from publication-informed trading. Post-publication declines are greater for predictors with higher in-sample returns, and returns are higher for portfolios concentrated in stocks with high idiosyncratic risk and low liquidity. Predictor portfolios exhibit post-publication increases in correlations with other published-predictor portfolios. Our findings suggest that investors learn about mispricing from academic publications.

https://rady.ucsd.edu/docs/seminars/pontiff-paper.pdf

Does Academic Research Destroy Stock Return Predictability

﻿LEAVING aside the courageous efforts of people around Monthly Review and Science and Society there has, by and large, been hardly any Marxist tradition among American intellectuals. However, during the last few years the situation has considerably changed and there is now a growing interest in Marxism, particularly among the younger social scientists of America. The book under review falls within this trend.

Value and Capital

We document significant “time series momentum” in equity index, currency, commodity, and bond futures for each of the 58 liquid instruments we consider. We find persistence in returns for 1 to 12 months that partially reverses over longer horizons, consistent with sentiment theories of initial under-reaction and delayed over-reaction. A diversified portfolio of time series momentum strategies across all asset classes delivers substantial abnormal returns with little exposure to standard asset pricing factors and performs best during extreme markets. Examining the trading activities of speculators and hedgers, we find that speculators profit from time series momentum at the expense of hedgers.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2089463_code753937.pdf?abstractid=2089463

Time Series Momentum

http://docs.lhpedersen.com/TimeSeriesMomentum.pdf

Time series momentum.

In this article, the authors study the performance of trend-following investing across global markets since 1880, extending the existing evidence by more than 100 years using a novel data set. They find that in each decade since 1880, time-series momentum has delivered positive average returns with low correlations to traditional asset classes. Further, time-series momentum has performed well in 8 out of 10 of the largest crisis periods over the century, defined as the largest drawdowns for a 60/40 stock/bond portfolio. Lastly, the authors find that time-series momentum has performed well across different macro environments, including recessions and booms, war and peace, high- and low-interest-rate regimes, and high- and low-inflation periods.

A Century of Evidence on Trend-Following Investing

We show that the returns of Managed Futures funds and CTAs can be explained by time series momentum strategies and we discuss the economic intuition behind these strategies. Time series momentum strategies produce large correlations and high-R-squares with Managed Futures indices and individual manager returns, including the largest and most successful managers. While the largest Managed Futures managers have realized significant alphas to traditional long-only benchmarks, controlling for time series momentum strategies drives the alphas of most managers to zero. We consider a number of implementation issues relevant to time series momentum strategies, including risk management, risk allocation across asset classes and trend horizons, portfolio re-balancing frequency, transaction costs, and fees.

Demystifying Managed Futures

We show that the returns of Managed Futures funds and CTAs can be explained by time series momentum strategies and we discuss the economic intuition behind these strategies. Time series momentum strategies produce large correlations and high Rsquares with Managed Futures indices and individual manager returns, including the largest and most successful managers. While the largest Managed Futures managers have realized significant alphas to traditional long-only benchmarks, controlling for time series momentum strategies drives their alphas to zero. We consider a number of implementation issues relevant to time series momentum strategies, including risk management, risk allocation across asset classes and trend horizons, portfolio rebalancing frequency, transaction costs, and fees. * Brian Hurst and Yao Hua Ooi are at AQR Capital Management, LLC. Lasse Heje Pedersen is at New York University, Copenhagen Business School, AQR Capital Management, CEPR, and NBER, web: http://people.stern.nyu.edu/lpederse/ . We are grateful to Cliff Asness, John Liew and Antti Ilmanen for helpful comments and to Ari Levine and Vineet Patil for excellent research assistance.

https://pages.stern.nyu.edu/~lpederse/papers/DemystifyingManagedFutures.pdf

Yao Hua Ooi

Papers

Time Series Momentum

Time series momentum.

A Century of Evidence on Trend-Following Investing

Demystifying Managed Futures

Demystifying Managed Futures