July 28, 2010

Hanno Lustig Wins NASDAQ OMX Award for Best Paper on Asset Pricing

Award was presented at the Western Finance Association Meeting

LOS ANGELES -- UCLA Anderson Associate Professor Hanno Lustig recently received the NASDAQ OMX Award for Best Paper on Asset Pricing for a paper entitled, "Is the Volatility of the Market Price of Risk due to Intermittent Portfolio Rebalancing?" The paper was co-authored with Hal Cole and Yi-Li Chien. The prize, which includes a $5,000 cash award, was presented at the Western Finance Association Meeting in Victoria, British Columbia in June.

Lustig was recently promoted to the rank of Associate Professor, with tenure. His research focus is asset pricing, macroeconomics and international finance.

Abstract
Our paper examines whether the well-documented failure of unsophisticated investors to rebalance their portfolios can help to explain the enormous counter-cyclical volatility of aggregate risk compensation in financial markets. We find that these intermittent re-balancers amplify the effect of aggregate shocks on the time variation in risk premia by a factor of three by forcing active traders to sell more shares in good times and buy more shares in bad times.

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