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Lasse Heje Pedersen: Research
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BOoks
Market
Liquidity: Asset Pricing, Risk, and Crises, Yakov Amihud,
Haim Mendelson, and Lasse Heje Pedersen, Cambridge
University Press, 2013. NEW.
Published and ForthcominG PAPERS
Betting
Against Beta, Andrea Frazzini and Lasse Heje Pedersen (2010), Journal of Financial Economics,
forthcoming. Slides.
Excel.
BAB
Factors.
A model of leverage and margin
constraints help explain the relation between risk and return in each of the
major asset classes, including why high beta equals low alpha.
Swiss Finance Institute Outstanding
Paper Award, 2011.
Roger F. Murray Prize, 2011.
Featured in The
Economist and Financial
Times.
Solicited, Journal of
Financial Economics.
Dynamic
Trading with Predictable Returns and Transaction Costs, Nicolae Garleanu and Lasse Heje Pedersen (2012), The Journal of Finance,
forthcoming. Slides.
NEW
VERSION. Picture.
Markowitz portfolio is a moving target.
Cool closed-form optimal strategy: aim in front of the target and trade
partially towards the aim.
Demystifying Managed Futures, Brian Hurst, Yao Hua Ooi,
and Lasse Heje Pedersen
(2013), Journal of Investment Management, forthcoming.
Time series momentum strategies can
explain the return of managed futures hedge funds.
Value
and Momentum Everywhere,
Value and momentum effects appear across global markets in equities,
commodities and bonds. There is an intriguing val-mom
correlation structure. Liquidity and long-run consumption risks play a
role.
Featured in the New York Times and Marketwatch.
Time
Series Momentum, Tobias Moskowitz,
Striking persistence of returns linked to the trading activity of
hedgers and speculators.
Featured in the Financial Times.
Margin-Based
Asset Pricing and Deviations from the Law of One Price, Nicolae Garleanu and Lasse Heje Pedersen (2011), The
Review of Financial Studies, 24(6), 1980-2022. Slides.
Data.
Understanding the effects of the Fed’s lending programs, the CDS-bond
basis, the failure of the covered interest-rate parity, and more.
Michael Brennan Award Winner for the Best Paper in the Review of
Financial Studies.
Leverage
Aversion and Risk Parity, Cliff Asness, Andrea Frazzini, and Lasse Heje Pedersen (2012), Financial
Analysts Journal, 68(1), 47-59.
A Risk Parity portfolio that over-weights
safer asset classes outperforms the market. RP+BAB: This across-asset-class
evidence complements the within-asset-class evidence on Betting Against Beta.
Two
Monetary Tools: Interest Rates and Haircuts, Adam Ashcraft, Nicolae Garleanu, and Lasse H. Pedersen
(2010), NBER Macroeconomics Annual, 25, 143-180. Slides.
A macro model with credit-supply
frictions: how central bank lending facilities can ease the credit frictions
– with strong empirical evidence from the recent crisis.
How
Sovereign is Sovereign Credit Risk?, Francis A. Longstaff, Jun Pan, Lasse H. Pedersen, and Kenneth J. Singleton (2010), American
Economic Journal: Macroeconomics, 3(2), 75–103.
Sovereign CDS can be explained by, and predicted by,
Featured in the Economic Times.
When
Everyone Runs for the Exit, Lasse H. Pedersen (2009), The International Journal
of Central Banking, 5, 177-199.
Understanding the global liquidity crisis
and the quant event. Evidence on the driving mechanisms. (A solicited commentary.)
Featured in The Economist, New York Times and Forbes.
Market
Liquidity and Funding Liquidity, Markus
Brunnermeier and Lasse H.
Pedersen (2009), The Review of Financial Studies, 22, 2201-2238.
Market liquidity and the funding conditions are mutually reinforcing, giving
rise to liquidity spirals, fragility, flight to quality, and systemic risk.
Featured in The Economist and Barron’s.
Demand-Based
Option Pricing, Nicolae Garleanu, Lasse H. Pedersen, and Allen Poteshman
(2009), The Review of Financial Studies, 22 (10), 4259-4299.
How end user demand affects option pricing when dealers cannot perfectly
hedge. New theory and unique data.
Geewax, Terker
& Company First Prize, 2006.
Carry
Trades and Currency Crashes, Markus
Brunnermeier, Stefan Nagel, and Lasse
Heje Pedersen (2008), NBER Macroeconomics Annual,
23, 313-348.
How the carry trade is subject to crash
risk during funding liquidity crisis. Results help resolve the forward premium
puzzle.
Featured in Forbes.
Slow
Moving Capital, Mark Mitchell, Lasse Heje Pedersen, and Todd Pulvino (2007), The American Economic Review,
P&P, 97, 215-220.
Empirical evidence: when arbitrageurs lose capital and new capital arrives
slowly, prices become depressed and later rebound.
Liquidity
and Risk Management, Nicolae Garleanu, and Lasse Heje Pedersen (2007),
The American Economic Review, P&P, 97, 193-197.
Tighter risk management can lead to illiquidity and lower prices. A
multiplier effects arises with liquidity-adjusted risk management.
Valuation
in Over-the-Counter Markets, Darrell Duffie, Nicolae Garleanu, and Lasse H. Pedersen (2007), The Review of Financial
Studies, 20, 1865-1900.
The effect of search and bargaining on asset prices and the dynamics of
aggregate liquidity shocks.
Liquidity
and Asset Prices, Yakov Amihud, Haim
Mendelson, and Lasse Heje Pedersen (2005), Foundations and Trends in Finance,
1, 269-364.
A survey of the literature.
Asset
Pricing with Liquidity Risk,
Viral Acharya and Lasse Heje Pedersen (2005), Journal of Financial Economics,
77, 375-410.
How unpredictable changes in liquidity affect security returns; a
liquidity-adjusted CAPM and empirical evidence.
Fama/DFA First Prize for best paper in
the Journal of Financial Economics, 2005.
NYSE Award for best paper on equity trading, Western Finance Association, 2003.
Glucksman First-Place Award for best
research paper in finance, NYU Stern, 2002-2003.
Predatory
Trading, Markus K. Brunnermeier and Lasse Heje Pedersen (2005), The Journal of Finance, 60,
1825-1863.
When a large trader liquidates, predators also sell, leading to price
over-shooting and systemic risk.
Nominated for the Smith-Breeden Prize for best paper in The Journal of
Finance, 2005.
Barclays Global Investors Award for the best conference paper at the
European Finance Association, 2003.
Over-the-Counter
Markets, Darrell Duffie, Nicolae Garleanu, and Lasse Heje Pedersen (2005), Econometrica,
73, 1815-1847.
Marketmakers' bid-ask spread is narrower
for sophisticated investors with better search options (NB: reverse of
information-based models).
Referenced in Nobel Prize Committee’s Scientific Background, 2010.
Adverse
Selection and the Required Return,
Nicolae Garleanu and Lasse Heje Pedersen (2004), The
Review of Financial Studies, 17, 643-665.
Bid-ask spreads due to asymmetric information affect required returns
differently than exogenous trading costs - paper shows explicitly how.
Modeling
Sovereign Yield Spreads: A Case Study of Russian Debt, Darrell Duffie, Lasse H. Pedersen, and Ken Singleton (2003), The Journal
of Finance, 58, 119-159.
A model of credit risk accounting for both default and restructuring. The
study of Russian debt develops a new estimation method.
Nominated for the Smith-Breeden Prize for best paper in The Journal of
Finance, 2003.
Securities
Lending, Shorting, and Pricing,
Darrell Duffie, Nicolae Garleanu, and Lasse Heje Pedersen (2002), Journal of Financial Economics,
66, 307-339.
Short sellers search for stock owners and pay a lending fee. The lending fee
increases the stock's price.
NYSE Award for best paper on equity trading, Western Finance Association, 2002.
Working Papers
Buffett's Alpha, Andrea Frazzini, David Kabiller, and Lasse Heje Pedersen (2012).
We explain Buffett's amazing record based on BAB, quality, and leverage. Quiz:
What is Buffett's SR?
Featured in The Economist, Reuters,
Reuters
Video (the actual secret sauce is at 1:30 minutes), CBS
News, Pensions
and Investments, Forbes,
Boersen.
Carry, Ralph Koijen, Tobias Moskowitz, Lasse H. Pedersen, and
Evert Vrugt (2012).
Carry is an important, directly
observable, component of expected returns, predicting the cross-section and
time series of global equity, bond, currency, and commodity returns.
Embedded Leverage, Andrea Frazzini and
Lasse Heje Pedersen (2011). Slides.
Securities
that embed leverage alleviate investors' leverage constraints and therefore
have lower required returns: Strong evidence from index options, equity
options, and leveraged ETFs.
Featured
in Barrons.
Measuring
Systemic Risk, Viral Acharya, Lasse Heje Pedersen, Thomas Philippon,
and Matt Richardson (2010).
An economic model of how to measure and manage systemic risk with empirical
support from the recent crisis.
Associated real time systemic risk
rankings here.
Early
Option Exercise: Never Say Never,
Mads Vestergaard Jensen and
Lasse Heje Pedersen (2012).
Theory and evidence overturning Merton's
rule that one should never exercise a call early or convert a convertible bond.
Low-Risk
Investing Without Industry Bets,
Cliff Asness, Andrea Frazzini,
and Lasse Heje Pedersen
(2012).
Betting against beta works within each
industry and across industries.
Quality Minus Junk,
Cliff Asness, Andrea Frazzini,
and Lasse Heje Pedersen
(2012).
We provide a definition of "quality
stocks" and study the price and return of quality.
Dynamic Portfolio Choice with Frictions, Nicolae Garleanu and Lasse Heje Pedersen (2013).
We derive the optimal portfolio
explicitly in a large class of models with frictions and provide a micro
foundation for transaction costs and their continuous-time limit.
A Century of Evidence on Trend-Following Investing, Brian Hurst, Yao Hua Ooi, and Lasse Heje Pedersen (2013).
Time series momentum has worked each
decade over the past century, across economic environments.
Monitoring
Leverage, John Geanakoplos and Lasse Heje Pedersen (2011).
Monitoring leverage and margin
requirement is a model-free way to monitor systemic risk and developments of
liquidity spirals.
Corporate
Bond Specialness, Amrut Nashikkar and Lasse Heje Pedersen (2007).
Shorting costs are high for corporate bonds that are of worse credit, more
expensive relative to the CDS, have equity on special, smaller issues, and more
illiquid.
Auctions
with Endogenous Selling, Nicolae Garleanu and Lasse Heje Pedersen (2000).
The effect of market structure on volume, prices, and welfare with
applications to real-world auctions.
Density-Based Inference in Affine Jump-Diffusions, Jun Liu, Jun Pan, and Lasse
Heje Pedersen (2000).
A closed-form approximation to the density of affine jump diffusions with
applications to finance.
Work in Progress
Global Market and Funding Liquidity Risk Across Asset Classes,
Too Big to Report,
Andrea Frazzini and Lasse Heje Pedersen (2010).
Crowded Trades and Liquidity Risk, Tobias Moskowitz and Lasse Heje Pedersen (2008).
Policy Papers, Op-Eds, and blogs
A Tax on Systemic Risk, Viral Acharya, Lasse H. Pedersen, Thomas Philippon,
and Matt Richardson (2010), in NBER publication on Quantifying Systemic Risk,
ed. by Joseph Haubrich and Andrew Lo.
Taxing Systemic Risk, Viral Acharya, Lasse H. Pedersen, Thomas Philippon,
and Matt Richardson (2010), in Regulating
Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance,
ed. by Acharya, Cooley, Richardson, and Walter,
Wiley, 2010, chap. 5.
Regulating Systemic Risk, Viral Acharya, Lasse Heje Pedersen, Thomas Philippon,
and Matt Richardson (2009), in Restoring Financial
Stability: How to Repair a Failed System, ed. by Viral Acharya and Matt Richardson, Wiley, chap. 13, 283-304. Summary.
Hedge Funds in the Aftermath of the Financial Crisis Stephen Brown, Marcin
Kacperczyk, Alexander Ljungqvist,
Anthony Lynch, Lasse Heje
Pedersen, and Matthew Richardson (2009), in Restoring Financial
Stability: How to Repair a Failed System, ed. by Viral Acharya and Matt Richardson, Wiley, chap. 6, 157-178. Summary.
Saving
free markets from market failure: institutions and liquidity are crucial, Lasse Heje
Pedersen, Forbes, 9/29/2009.
Chinese version, sina.com.cn: 佩德森：避免自由市场失灵
A
proposal to prevent wholesale financial failure, Lasse H. Pedersen and Nouriel Roubini, Financial Times, 1/30/2009.
Liquidity
risk and the current crisis, Lasse H. Pedersen, Stern
on Finance and VoxEU.
RESEARCH SUMMARIES AND TIPS:
Overview of frictional finance. pdf, ppt
Tips on How to Succeed in Academia for ph.d. students and junior faculty.
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