Asset Pricing

WORKING PAPERS

Anomalies With Early Exit 

KumarPrabhalaRanjan

Profitability, value, and momentum strategies produce significant and robust profits over 50 years in large capitalization stocks and value-weighted portfolios when using machine-learning-determined strategies to exit trades.

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PUBLISHED PAPERS

Buy-Side Competition and Momentum Profits

Authored by Gerard Hoberg, Nitin Kumar, and Nagpurnanand Prabhala

HobergKumarPrabhala2

The Review of Financial Studies 35 (2022) 254–298

© The Author(s) 2021. Published by Oxford University Press on behalf of The Society for Financial Studies.

The paper proposes a new measure for competition for momentum profits. Momentum return spreads equal 13.2% per year when competition is low and negligible when competition is high. The alphas are attained with superior Sharpe ratios, low skewness, and in more investible strategies with value-weighted portfolios and only large capitalization stocks. 

Mutual Fund Competition, Managerial Skill, and Alpha Persistence

Authored by Gerard Hoberg, Nitin Kumar, and Nagpurnanand Prabhala

HobergPrabhalaKumar1

The Review of Financial Studies , May 2018, Vol. 31, No. 5 (May 2018), pp. 1896-

1929

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The paper proposes a new measure of competition faced by funds, one that is fund-specific, dynamic, and intransitive. Skill, or alpha, is a fund’s return relative to that of its competitors. We show that alpha is high when funds face less competition. Alpha persists for up to four quarters. 

The Relation Between Implied and Realized Volatility

Authored by B.J. Christensen and N.R. Prabhala

ChristensenPrabhala

Journal of Financial Economics 50 (1998) 125—150

0304-405X/98/$— see front matter ( 1998 Elsevier Science S.A. All rights reserved

PII: S 0 3 0 4 - 4 0 5 X ( 9 7 ) 0 0 0 3 4 - 8

The volatility implied by S&P 100 index option prices has significant predictive power for forecasting future realized volatility.