Challenging the Foundation of Asset Pricing Theory with Andrew Chen and Alejandro Lopez-Lira

Excess Returns · Feb 1, 2024 · 53m

Those of us that invest using factors have been taught that there needs to be a reason why they work. We have been taught that for their excess returns to persist in the future, there should be a behavioral or risk-based explanation as to why they exist in the first place. If that assumption is wrong, it would call into question the validity of much of the work that has been done in asset pricing research and would also have significant implications for real world investment strategies build using the research. Our guest this week recently published a paper that calls those core ideas of…