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Interview

Words From the Wise: An AQR Interview with Ed Thorp

We sat down with Ed Thorp, a pioneer in the mathematical analysis of casino games and investing, to get his insights on an array of topics from casino gambling to quantitative investing.

Working Paper

Learning, Dispersion of Beliefs, and Risk Premiums in an Arbitrage-Free Term Structure Model

In this paper, researchers explore the idea that knowing how much professionals disagree about how quickly the U.S. economy is emerging from a recession may produce actionable insight into the future performance of the bond market.

Journal Article

The Limits to Arbitrage and the Low-Volatility Anomaly

Researchers have found that a strategy of buying prior low volatility stocks and selling prior high volatility risk stocks has historically generated substantial abnormal returns in the U.S.

Journal Article

Arbitrage Crashes and the Speed of Capital

Modern finance theory rests on the ability of arbitrageurs to ensure that substantially similar assets trade at substantially similar prices.

White Paper

Arbitrage: A Brief Introduction

Arbitrage strategies use relative-value trades to generate potential excess returns with attractive risk profiles. We offer a brief introduction to arbitrage, including descriptions of several common strategies and an overview of historical performance.

White Paper

The Limits of Convertible Bond Arbitrage

Convertible bond arbitrage suffered abysmally after the collapse of Lehman Brothers in 2008. This case study looks at how these strategies can break down in times of crisis, and the opportunities they offer in the aftermath.

White Paper

The Convertible Bond Market Dislocation of 2008

The convertible bond market dislocation of 2008 provided investors an unprecedented investment opportunity. We apply insights from this time to discuss how investors might benefit from this opportunity.

Journal Article

When Everyone Runs for the Exit

The severe consequences for the global economy brought about by the 2008 liquidity crisis highlight the importance of liquidity risk.

Journal Article

Price Pressure Around Mergers

It has been well documented that when companies use stock as the currency in a takeover, the acquiring company’s share price tends to fall between –2% and –3% around the time a deal is announced.

Book

Merger Arbitrage

How does one regulate systemic risk in the financial sector? We propose charging each financial firm a tax based on its expected loss during a systemic crisis.