Weekly Top 5 Papers – August 23, 2018

1. Scholarly Impact of Law School Faculties in 2018: Updating the Leiter Score Ranking for the Top Third by Gregory C. Sisk (University of St. Thomas School of Law (Minnesota)), Nicole Catlin (University of St. Thomas (Minnesota), School of Law), Katherine Veenis (Independent), and Nicole Zeman (Independent)


2.  Trading Costs by Andrea Frazzini (AQR Capital Management, LLC), Ronen Israel (AQR Capital Management, LLC), and Tobias J. Moskowitz (Yale University, Yale SOM)

The genesis of this paper was to examine trading and implementation costs using live trading data from a real-world and large institutional investor.  Most estimates of trading cost in the literature come from trade and quote data or aggregated broker data.  We obtained unique data from a large institutional money manager that examined trade-level executions across tens of thousands of stocks in 21 international markets.  From these data we could estimate price impact functions – the per dollar cost of trading per fraction of daily volume traded – and address some important questions in the both the microstructure literature as well as more generally describe what implementation costs look like in practice.  The paper serves as a precursor to other work we are engaged in or plan to pursue.  Namely, an assessment of the after-trading cost returns of various market anomalies, such as value, momentum, and size-based strategies and an analysis of the tradeoffs between minimizing trading costs and tracking error to the optimal portfolio before costs that one wishes to implement in practice.  We hope this paper will have many followers who can use our trading cost model for their own analysis and to address other important questions that have gone unanswered due to lack of reliable cost estimates.  We also hope to spawn new ideas on how to think about trading costs and implementation issues more generally.    –Toby Moskowitz


3.  Pulling the Goalie: Hockey and Investment Implications by Clifford S. Asness (AQR Capital Management, LLC), and Aaron Brown (New York University (NYU) – Courant Institute of Mathematical Sciences)


4.  Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society by Deborah Thorne (University of Idaho), Pamela Foohey (Indiana University Maurer School of Law), Robert M. Lawless (University of Illinois College of Law), and Katherine M. Porter (University of California – Irvine School of Law)

We are pleased that our manuscript, “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society,” has garnered so much attention from other scholars. Clearly, this is an issue that has touched a nerve. As such, we encourage others to conduct additional research on the financial struggles confronted by aging Americans. Our results are, we believe, just the tip of the iceberg.

We are also concerned about what the off-loading of financial risks means for older Americans. Without adequate and secure retirement accounts and access to affordable healthcare, we expect that this increasing trend of bankruptcy among older people will worsen. A national conversation about how we are treating our oldest citizens is imperative, and we strongly encourage our political leaders, at the local, state, and national levels, to think deeply about this issue as they set policy. Through the early 20th century, the destination for the financially destitute elderly was often the poor house. We should not as a nation return to those days.  — Debb Thorne


5.  A Quantitative Approach to Tactical Asset Allocation by Meb Faber (Cambria Investment Management)


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