Reference · Look-ups · Chapter R3

Reading list

The primary sources behind the book

These are the papers and books behind the book's claims. The first four lists are the Edge Book's reading list, in its order, with the chapters that use each source. The last lists every other study the chapters cite. Where a finding bears on a decision, its chapter gives the number, the sample and the caveats, so read a study through the chapter before you act on it.

The journals are named in full: the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies, the Journal of Portfolio Management, the Journal of Monetary Economics, the Review of Accounting Studies and Mathematical Finance. A reference such as "15:145-161" is the volume, then the pages.

1 · Foundational papers

The Edge Book's list of papers to read first.

  • Mehra and Prescott (1985), "The Equity Premium: A Puzzle", Journal of Monetary Economics 15:145-161. It named the equity premium puzzle: the observed premium is too large to fit standard models of utility. Chapter 1D and Chapter 10B.
  • Jegadeesh and Titman (1993), "Returns to Buying Winners and Selling Losers", Journal of Finance 48:65-91. The canonical study of momentum. Chapter 3B and Chapter 10F.
  • Fama and French (1993), "Common Risk Factors in the Returns on Stocks and Bonds", Journal of Financial Economics 33:3-56. The canonical study of value. Chapter 10F.
  • Carr and Wu (2009), "Variance Risk Premiums", Review of Financial Studies 22:1311-1341. Chapter 10C.
  • Asness, Moskowitz and Pedersen (2013), "Value and Momentum Everywhere", Journal of Finance 68:929-985. Chapter 10D and Chapter 10F.
  • Frazzini and Pedersen (2014), "Betting Against Beta", Journal of Financial Economics 111:1-25. Chapter 10F and Chapter 13A.
  • Jurek and Stafford (2015), "The Cost of Capital for Alternative Investments", Journal of Finance 70:2185-2226. The Edge Book calls it required reading for the variance risk premium (VRP). Chapter 1D and Chapter 10C.
  • Daniel and Moskowitz (2016), "Momentum Crashes", Journal of Financial Economics 122:221-247. Chapter 10F.
  • Hurst, Ooi and Pedersen (2017), "A Century of Evidence on Trend-Following Investing", Journal of Portfolio Management 44:15-29. Chapter 3B, Chapter 10D and Chapter 13E.

2 · Critical updates and corrections

Later work that qualifies, updates or corrects the papers above.

  • Asness, Frazzini, Israel, Moskowitz and Pedersen (2018), "Size Matters, If You Control Your Junk", Journal of Financial Economics 129:479-509. Chapter 10F.
  • Cieslak, Morse and Vissing-Jorgensen (2019), "Stock Returns Over the FOMC Cycle", Journal of Finance 74:2201-2248. Chapter 10G, Chapter 11B, Chapter 13E and Chapter 13F.
  • Bondarenko (2014), an empirical analysis of the Cboe PUT Index. Chapter 10C.
  • Asness, Frazzini and Pedersen (2019), "Quality Minus Junk", Review of Accounting Studies 24:34-112. Chapter 10F and Chapter 13F.
  • McLean and Pontiff (2016), "Does Academic Research Destroy Stock Return Predictability?", Journal of Finance 71:5-32. Chapter 1G and Chapter 11J.
  • Arnott, Harvey, Kalesnik and Linnainmaa (2021), "Reports of Value's Death May Be Greatly Exaggerated", Journal of Portfolio Management. Chapter 10F and Chapter 13F.
  • Kurov, Sancetta, Strasser and Wolfe (2021), on the decay of the drift before FOMC announcements after 2015. Chapter 10A, Chapter 10I and Chapter 13F cite the same finding to Kurov, Halova, Wolfe and Gilbert (2021).
  • Novy-Marx and Velikov (2022), "Betting Against Betting Against Beta", Journal of Financial Economics. Chapter 10F, Chapter 13A and Chapter 13F.
  • Jensen, Kelly and Pedersen (2023), "Is There a Replication Crisis in Finance?", Journal of Finance. It finds a decline of about 47% after publication. Chapter 1G, Chapter 10A, Chapter 10F, Chapter 11J and Chapter 13F.
  • Greenwood and Sammon (2024), on the decay of the S&P 500 inclusion premium. Chapter 1G, Chapter 10A, Chapter 10I and Chapter 13F.
  • Bakshi, Crosby and Gao (2024), "Disaster-Sensitive Portfolios", Mathematical Finance. Chapter 1D and Chapter 10C.

3 · Practitioner and data sources

4 · Books worth owning

  • Pedersen, Efficiently Inefficient: a practitioner's framework.
  • Asness and co-authors, AQR Insights, collected: readable essays on factors.
  • Bouchaud and Potters, Theory of Financial Risk: the quantitative treatment.
  • Sinclair, Volatility Trading, second edition: options volatility for practitioners.
  • Kelly and co-editors, Recent Advances in Financial Engineering: a compilation of research.

5 · Also cited in the book

Every other study the chapters cite by author and year, with the chapters that cite it. The chapters give each study's finding, its sample and its caveats.