Speaker: Prof. Dong Lou | London School of Economics
Topic: The Booms and Busts of Beta Arbitrage
Summary:Based on the August 2015 paper by Dong Lou with Shiyang Huang and Christopher Polk.
In this talk Professor Dong Lou of the LSE will review the assertion that low-beta stocks deliver high average returns and low risk relative to high-beta stocks, and give professional investors an opportunity to benefit. He will argue that beta-arbitrage activity instead generates booms and busts in the strategy’s abnormal trading profits. In times of low activity, the beta-arbitrage strategy exhibits delayed correction, taking up to three years for abnormal returns to be realised. In stark contrast, when activity is high, prices overshoot as short-run abnormal returns are much larger and then revert in the long run. He will discuss a novel analysis of a positive-feedback channel operating through firm-level leverage that may facilitate these boom and bust cycles.
Dr. Dong Lou
Dr. Lou is an Associate Professor (tenured professor) in Finance at London School of Economics and Political Science. Dr. Lou has been a Researcher at the Centre for Economic Policy Research in the United Kingdom since 2013 and an Associate Editor at Management Science and Journal of Empirical Finance since 2014. Dr. Lou worked as an Assistant Professor in Finance at the London School of Economics and Political Science from 2009 to 2015. He has been an Independent Non-Executive Director of Xingye Copper International Group Ltd since August 17, 2015. Dr. Lou graduated from Columbia University with a degree of Bachelors of Computer Science in 2004 and obtained a doctoral degree from Yale University in Financial Economics in 2009.
- LQG Evening Seminar: 12th July 2016 at 18:30
- This seminar will be held at Thompson Reuters,
30 South Colonnade , Canary Wharf, London, E14 5EP
- Refreshments shall be provided.
- While there is no cost to attend, you do need to register at Eventbright registration link here.