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''Panta rhei.''

Overview

Research area:
Asset pricing, in connection with macroeconomics, corporate finance, labor economics, computational economics, capital markets research in accounting, microeconometrics, cliometrics, history of economic thought, and philosophy of science

My CV (8/2022) | Google Scholar | q-data library | SSRN | YouTube

My unique worldview of asset pricing, which differs drastically from both the consumption CAPM and behavioral finance, is elaborated in my 2017 article "The Investment CAPM" at European Financial Management. See also (i) Keynote: Realist Asset Pricing: A Copernican Revolution (YouTube) at the 2022 Brazilian Finance Meeting (EBFin), July 2022, Vitoria, Brazil. This talk provides a progress report on my ongoing effort to rebuild the philosophical (meta-theoretical) foundation for asset pricing. (ii) Keynote: The Investment CAPM: Latest Developments (YouTube) at the Swedish House of Finance (SHoF) Conference on ''Financial Markets and Corporate Decisions," Stockholm School of Economics, August 2019, Stockholm, Sweden. (iii) Keynote: Toward a theory of everything? (YouTube) at the 6th Annual UConn Finance Conference, May 21, 2021. This talk summarizes my research program that aims to explain the equity premium puzzle in general equilibrium production economies by integrating macro labor with asset pricing.

My five representative articles: (i) Replicating anomalies (with Hou and Xue, 2020). Review of Financial Studies. Most anomalies fail to replicate | Lecture notes | YouTube (ii) Endogenous disasters (with Petrosky-Nadeau and Kuehn, 2018). American Economic Review. Market economies are intrinsically unstable | Lecture notes | YouTube (iii) Digesting anomalies: An investment approach (with Hou and Xue, 2015). Review of Financial Studies. The q-factor model largely summarizes the cross section of average stock returns | Lecture notes | YouTube (iv) Investment-based expected stock returns (with Liu and Whited, 2009). Journal of Political Economy. Structurally estimating the investment CAPM | Lecture notes | YouTube (v) The value premium (2005). Journal of Finance. The first RBC model for the cross section of returns | Lecture notes | YouTube

My Ph.D. dissertation, 2002, Essays on the cross-section of returns, The Wharton School, University of Pennsylvania.
Working Papers

Zhang, Lu, 2022, The investment worldview. Slides | Firms, not investors, are the primary causal powers of their own asset prices

Bai, Hang, Erica X. N. Li, Chen Xue, and Lu Zhang, 2022, Asymmetric investment rates. Slides | YouTube | The firm-level current-cost investment rate distribution is heavily right-skewed

Zhang, Lu, 2005, Anomalies, NBER working paper 11322 | Runner-up, Best Paper Award at the 2005 Utah Winter Finance Conference | An economic explanation for why investment and profitability play a fundamental role in the cross section of expected returns
Publications
[All articles are the sole copyright of the respective publishers. Materials are provided for educational use only.]

2022

Hou, Kewei, Haitao Mo, Chen Xue, and Lu Zhang, The economics of security analysis, forthcoming, Management Science. The Internet Appendix | Lecture notes | YouTube | What happened to price-to-book ratio in value investing? Nir Kaissar, Bloomberg, July 21, 2021

Bai, Hang, and Lu Zhang, Searching for the equity premium, Journal of Financial Economics 143 (2), 897-926. The Internet Appendix | Lecture notes | YouTube

2021

Hou, Kewei, Haitao Mo, Chen Xue, and Lu Zhang, An augmented q-factor model with expected growth, Review of Finance 25 (1), 1-41. Editor's Choice, lead article | Supplementary appendix | Lecture notes | Keynote at 5th AP2-CFF Conference on "Can Financial Research Be Used in the Finance Industry?" University of Gothenburg, Sweden | Finalist, 2021 Spangler-IQAM Prize for best investments paper published in Review of Finance | Building a better q-factor asset pricing model, Larry Swedroe, alpha architect blog, April 22, 2021 | q-factors data library | YouTube

Petrosky-Nadeau, Nicolas, and Lu Zhang, Unemployment crises, Journal of Monetary Economics 117, 335-353. The Internet Appendix | Historical series of U.S. unemployment rates, vacancy rates, and labor productivity | Unemployment worst since Depression era, by Heather Long and Andrew Van Dam, The Washington Post, May 9, 2020 | Few precedents for grim US jobless numbers, by Brooke Fox and Steven Bernard, Financial Times, May 9, 2020

2020

Zhang, Lu, Q-factors and investment CAPM, in Oxford Research Encyclopedia of Economics and Finance, Oxford University Press. doi: https://doi.org/10.1093/acrefore/9780190625979.013.593 | q-factors and investment CAPM, by Tyler Cowen, Marginal Revolution, December 13, 2019 | Another take on q-factors and investment CAPM, by Tyler Cowen, Marginal Revolution, December 14, 2019 | q-factors data library

Goncalves, Andrei S., Chen Xue, and Lu Zhang, Aggregation, capital heterogeneity, and the investment CAPM, Review of Financial Studies 33 (6), 2728-2771. The Internet Appendix | Lecture notes | YouTube 

Hou, Kewei, Chen Xue, and Lu Zhang, Replicating anomalies, Review of Financial Studies 33 (5), 2019-2133. The Internet Appendix | Lecture notes | YouTube | Slides at NBER Long-term Asset Management Conference, May 2018 | Keynote at the 2017 Autumn Inquire Europe Symposium on ''Advances in Factor Investing,'' October 2017 | Second Prize, the 2017 Chicago Quantitative Alliance Academic Competition | Professor has some questions about your index funds, by Nir Kaissar, Bloomberg, December 24, 2018 | A reality check on stock-market 'anomalies,' by Wesley Gray, The Wall Street Journal, November 5, 2017 | When researchers and investors walk into a bar, the investors get hammered, by Jason Zweig, The Wall Street Journal, May 12, 2017 | An algorithm, an ETF and an academic study walk into a bar, by James Mackintosh, The Wall Street Journal, May 11, 2017 | Anomalies, pitches and promises, by Matt Levine, Bloomberg, May 9, 2017 | A new paper just took a huge shot at some of the world's hottest investments, by Eric Weiner, Bloomberg, May 8, 2017 | q-factors data library

2019

Bai, Hang, Kewei Hou, Howard Kung, Erica X. N. Li, and Lu Zhang, The CAPM strikes back? An equilibrium model with disasters, Journal of Financial Economics 131 (2), 269-298. Lecture notes | YouTube

Hou, Kewei, Haitao Mo, Chen Xue, and Lu Zhang, Which factors? Review of Finance 23 (1), 1-35. Editor's Choice, lead article | Supplementary appendix | Lecture notes | YouTube | 2019 Spängler IQAM Best Paper Prize for the best investments paper published in Review of Finance, European Finance Association | one of top 10 highly cited articles published at Review of Finance in 2018-2019 | Second Prize, the 2015 Chicago Quantitative Alliance Academic Competition | Swedroe: Battle of new factor models, ETF.com | q-factors data library

2018

Petrosky-Nadeau, Nicolas, Lu Zhang, and Lars-Alexander Kuehn, Endogenous disasters, American Economic Review 108 (8), 2212-2245. The Internet Appendix | Lecture notes | Data and codes | YouTube

2017

Zhang, Lu, The investment CAPM, European Financial Management 23 (4), 545-603. Lead article | Lecture notes | Keynote at the European Financial Management Symposium on "Finance and Real Economy," April 2017, Xiamen, China | Keynote on "The Investment CAPM: An Update" at "Merton H. Miller" EFM 2018 Doctoral Seminar, June 2018, Milan, Italy | Keynote at 2nd Annual Conference on ''Corporate Policies and Asset Prices,'' Cass Business School, City, University of London, December 2018, London, UK | Keynote on "The Investment CAPM: Latest Developments" (YouTube) at the Swedish House of Finance (SHoF) Conference on ''Financial Markets and Corporate Decisions," Stockholm School of Economics, August 2019, Stockholm, Sweden | Another take on q-factors and investment CAPM, by Tyler Cowen, Marginal Revolution, December 14, 2019

Petrosky-Nadeau, Nicolas, and Lu Zhang, Solving the Diamond-Mortensen-Pissarides model accurately, Quantitative Economics 8 (2), 611-650. Lecture notes | Codes | YouTube

2016

Zhang, Lu, Factors war, Tsinghua Financial Review 37, 101-104 in Chinese | q-factors data library

2015

Hou, Kewei, Chen Xue, and Lu Zhang, Digesting anomalies: An investment approach, Review of Financial Studies 28 (3), 650-705. Editor's Choice, lead article | The Internet Appendix | Lecture notes | YouTube | Oxford University Press blog: A new benchmark for estimating expected stock returns | Swedroe: Passive investing's foundations, ETF.com | Most cited RFS paper published in 2015 | | q-factors data library

2014

Liu, Laura Xiaolei, and Lu Zhang, 2014, A neoclassical interpretation of momentum, Journal of Monetary Economics 67, 109-128. Lecture notes

Tang, Yue, Jin (Ginger) Wu, and Lu Zhang, Do anomalies exist ex ante? Review of Finance 18 (3), 843-875. Lead article.

2013

Belo, Frederico, Chen Xue, and Lu Zhang, A supply approach to valuation, Review of Financial Studies 26 (12), 3029-3067. The Internet Appendix | Lecture notes

Lin, Xiaoji, and Lu Zhang, The investment manifesto, Journal of Monetary Economics 60 (3), 351-366. Lecture notes

2011

Gulen, Huseyin, Yuhang Xing, and Lu Zhang, Value versus growth: Time-varying expected stock returns, Financial Management 40 (2), 381-407.

Chen, Long, and Lu Zhang, Do time-varying risk premiums explain labor market performance? Journal of Financial Economics 99 (2), 385-399.

2010

Li, Dongmei, and Lu Zhang, Does q-theory with investment frictions explain anomalies in the cross-section of returns? Journal of Financial Economics 98 (2), 297-314. Lecture notes

Wu, Jin (Ginger), Lu Zhang, and X. Frank Zhang, The q-theory approach to understanding the accrual anomaly, Journal of Accounting Research 48 (1), 177-223.

2009

Liu, Laura Xiaolei, Toni M. Whited, and Lu Zhang, Investment-based expected stock returns, Journal of Political Economy 117 (6), 1105-1139. The Internet Appendix | Gauss programs and data | Matlab programs and data | Lecture notes | YouTube

Li, Erica X. N., Dmitry Livdan, and Lu Zhang, Anomalies, Review of Financial Studies 22 (11), 4301-4334. Lead article | Lecture notes

Livdan, Dmitry, Horacio Sapriza, and Lu Zhang, Financially constrained stock returns, Journal of Finance 64 (4), 1827-1862. Lecture notes

2008

Liu, Laura Xiaolei, and Lu Zhang, Momentum profits, factor pricing, and macroeconomic risk, Review of Financial Studies 21 (6), 2417-2448.

Lyandres, Evgeny, Le Sun, and Lu Zhang, The new issues puzzle: Testing the investment-based explanation, Review of Financial Studies 21 (6), 2825-2855. Runner-up, Barclays Global Investors Award for the Best Conference Paper at the 2005 European Finance Association Annual Meetings

Liu, Naiping, and Lu Zhang, Is the value spread a useful predictor of returns? Journal of Financial Markets 11 (3), 199-227.

Campello, Murillo, Long Chen, and Lu Zhang, Expected returns, yield spreads, and asset pricing tests, Review of Financial Studies 21 (3), 1297-1338.

Chen, Long, Ralitsa Petkova, and Lu Zhang, The expected value premium, Journal of Financial Economics 87 (2), 269-280.

2006

Gomes, Joao F., Amir Yaron, and Lu Zhang, Asset pricing implications of firms' financing constraints, Review of Financial Studies 19 (4), 1321-1356.

2005

Petkova, Ralitsa, and Lu Zhang, Is value riskier than growth? Journal of Financial Economics 78 (1), 187-202. Discussion in Bodie, Kane, and Marcus, 2018, Investments, 11th edition.

Zhang, Lu, The value premium, Journal of Finance 60 (1), 67-103. Lecture notes | YouTube | First Prize, Smith-Breeden Award for Best Paper in 2005 from Journal of Finance and American Finance Association | Matlab and Fortran 90 programs | Discussion in Bodie, Kane, and Marcus, 2018, Investments, 11th edition | One of the 25 most cited articles in Journal of Finance since 2004 | The 4th most highly cited article in the literature on anomalies and fundamental analysis since 2000 with the highest average number of citations per year per Richardson, Tuna, and Wysocki (2010) | Swedroe: Understanding the value premium

2004

Brandt, Michael W., Qi Zeng, and Lu Zhang, Equilibrium stock return dynamics under alternative rules of learning about hidden states, Journal of Economic Dynamics and Control 28 (10), 1925-1954. Lead article.

2003

Gomes. Joao F., Amir Yaron, and Lu Zhang, Asset prices and business cycles with costly external finance, Review of Economic Dynamics 6 (4), 767-788.

Gomes, Joao F., Leonid Kogan, and Lu Zhang, Equilibrium cross section of returns, Journal of Political Economy 111 (4), 693-732. Lead article | Matlab programs | Erratum | Reprinted in ''Stephen A. Ross, Mentor: Influence Through Generations,'' ed. Mark Grinblatt, McGraw-Hill Irwin, 2008
Other Publications

Zhang, Lu, 2018, Editorial: EFM Special Issues on ''Corporate Policies and Asset Prices,'' European Financial Management 24 (4), 487.

Zhang, Lu, 2014, Exploring asset pricing anomalies, NBER Reporter 1, 17-19.




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