The Rational Reminder Podcast

Episode 316 - Andrew Chen: "Is everything I was taught about cross-sectional asset pricing wrong?!"

36 snips
Aug 1, 2024
Guest
Andrew Chen
In this engaging discussion, Andrew Chen, a Principal Economist at the Federal Reserve Board, dives into the complexities of asset pricing. He challenges traditional views, exploring the intricate dynamics of cross-sectional asset pricing predictors and the replication crisis in financial research. Andrew highlights his groundbreaking Open Source Asset Pricing project, emphasizing the need for high-quality data and transparency. The talk also touches on publication bias, transaction costs, and the evolving role of machine learning in identifying market anomalies—all crucial for refining investment strategies.
Ask episode
AI Snips
Chapters
Transcript
Episode notes
ADVICE

Open Source Data Importance

  • Share your replication code and data openly to foster collaboration beyond competition.
  • High-quality, well-documented open-source data is crucial for progress in asset pricing research.
INSIGHT

High Replication Success Rate

  • Of 300 studied variables, about 200 showed return predictability originally.
  • Replication success rate in his project was around 98%, challenging replication crisis claims.
INSIGHT

Anomaly Returns Decay Gradually

  • Out-of-sample returns for anomalies decline roughly 50% over time but do not disappear entirely.
  • Return decay is gradual, not immediate, contradicting false discovery fears.
Get the Snipd Podcast app to discover more snips from this episode
Get the app