When Is One Asset a Substitute for Another?
Suppose an investor holds an optimized portfolio and wishes to replace one of its constituents — because of a mandate, an access restriction, or a preference — with an asset that plays the same role. Which asset should be offered? The intui…
The Nature of Volatility Across Financial Instruments
We study the distribution of returns for 4,334 instruments across six asset classes — US equities, exchange-traded funds, US and Argentine fixed income, Argentine equities, and Argentine depositary receipts over foreign shares — using 9.2 m…
Beyond Expected Utility: Decision Theory at the Frontier of Financial Modeling
Through the no-arbitrage Euler equation, every asset price is a statement about preferences: the price of a payoff is its expectation under a stochastic discount factor built from the marginal utility of the investor who holds it. This self…
The Statistics of Return Forecasting: Heavy Tails, Estimation, and the Limits of Predictive Inference
A self-contained, mathematically rigorous account of why forecasting asset returns is hard, and of the estimation theory the difficulty demands. The paper formalizes the forecasting problem for a stationary, ergodic return process and decom…
The Behavioral Foundations of Asset Prices: A Pedagogical Survey of Investor Psychology, Limits to Arbitrage, and Market Anomalies
Classical finance assumes investors are rational optimizers and that competition drives prices to their fundamental values. Decades of evidence — from excess volatility and the equity-premium puzzle to long-horizon overreaction — strain tha…
Predicting Alpha: A Pedagogical Survey of the State of the Art in Return-Forecasting Signals
An alpha signal is any piece of information, available today, that helps predict the part of an asset's future return that is not simply compensation for bearing known risks. Hunting for such signals is the central activity of quantitative …