Digging Into Portfolio Composition

1. Introduction In this post I show how you can use D3.js to display properties of the $6$ month ranking period momentum trading strategy outlined in Jegadeesh and Titman (1993) over the period from January 1965 to December 1989. I want to be … [Continue reading]

Sacrificing Noise Traders

1. Introduction One way to look at the stock market is as an information aggregation technology. For instance, imagine that you are the CEO of a pencil making company, and have to decide whether or not to stick with making old-fashioned wood … [Continue reading]

Spontaneous Cognition Equilibrium

Some words...

1. Motivation This note develops an information-based asset pricing model based on Tirole (2009) where thinking through market contingencies is costly and fear of missing an important detail restrains trading behavior. For example, think about a … [Continue reading]

Factors vs. Characteristics

Click to embiggen. Some words...

1. Introduction Fama and French (1993) found that both a firm's size and its book-to-market ratios are highly correlated with its average excess return as illustrated in Figure 1 below. For instance, the center panel says that stocks with low … [Continue reading]