1. Global Factor Premiums by Guido Baltussen (Erasmus University Rotterdam (EUR)) and Laurens Swinkels (Erasmus University Rotterdam (EUR)) and Pim van Vliet (Robeco Asset Management – Quantitative Investing)
This paper shows very strong evidence on the main strategies underlying factor-based investing. Over the years several anomalous, but persistent patterns in returns have been discovered by fellow academics and ourselves. These patterns are also known as ‘return factors’ and are a hot topic in the investment industry, with tremendous growth in asset managed based on factors.
At the same time, many studies turn out to be hard to replicate. There is bias to positive results which is referred to as ‘p-hacking’. This p-hacking is a serious concern, but it can be addressed. For example, by raising the statistical bar. Furthermore, replication studies have become more common in
socialsciences. Campbell Harvey has put p-hacking on the financial research agenda with his AFA Presidential Address.
Nobody knows 100% sure if factors keep on working in the future. But what if the results were fake to start with? We, therefore, apply the same cures which are proposed by the leading scientists. Replicate previous studies, raise the statistical bar and apply extensive, deep datasets. It is our duty to apply the highest possible standards when doing research.
Over the past years, we have constructed a very extensive and deep historical dataset stretching back to 1800 with which we test 24 global factor premiums. We replicate several previous studies which typically go back ‘only’ 30-40 years, with some very strong and remarkable findings. – Guido Baltussen, Laurens Swinkels, and Pim van Vliet
2. WACC and CAPM according to Utilities Regulators: Confusions, Errors and Inconsistencies by Pablo Fernandez (University of Navarra – IESE Business School)
The idea for this paper grew out of our mutual interest in behavioral economics, golf and, in particular, analytical aspects of the sport. In this paper, we focus on loss aversion because the USGA’s choice in changing the par rating on these two holes results in a natural experiment for this context. It seemed like such a golden opportunity to take advantage of the natural experiment. With this year’s U.S. Open at Pebble
Beach,and last week’s PGA Tour tournament there as well, it was also quite timely. – Ryan Elmore & Andrew Urbaczewski
5. Big Other: Surveillance Capitalism and the Prospects of an Information Civilizationby Shoshana Zuboff (Berkman Center for Internet & Society)