BIO

Lasse Heje Pedersen is the John A. Paulson Professor of Finance and Alternative Investments at the NYU Stern School of Business, a professor at Copenhagen Business School, a principal at AQR Capital Management, and a research associate at CEPR and NBER. He has served as Director of the American Finance Association, in the Liquidity Working Group meeting at the Federal Reserve Bank of New York to address liquidity issues, in the New York Fed’s Monetary Policy Panel, in the Economic Advisory Boards of NASDAQ and FTSE, and on the editorial boards of the Journal of Finance, Journal of Economic Theory, The Review of Asset Pricing Studies, and Quarterly Journal of Economics. His academic awards include the Bernácer Prize to the best E.U. economist under 40 years of age, the Banque de France-TSE Prize, the Fama-DFA Prize, and the Michael Brennan Award. Lasse received his B.S. and M.S. from University of Copenhagen and his Ph.D. from Stanford University Graduate School of Business.


RESEARCH SUMMARY

http://www.amazon.com/Market-Liquidity-Asset-Pricing-Crises/dp/0521139651/
My research focuses on asset pricing and liquidity risk. It shows that a security’s required return is increased by market liquidity risk (as captured by the liquidity-adjusted capital asset pricing model) and funding liquidity risk (as captured by the margin CAPM), and how the interaction of market and funding liquidity can create liquidity spirals and systemic financial crisis. Indeed, when everyone runs for the exit,prices drop-and-rebound, margins increase, and risk management tighten.

These liquidity risk models can help explain equity returns, option prices, bond yields, currency crashes, valuation in OTC search markets, the CDS-bond basis and other failures of the Law of One Price, the effect of unconventional monetary policy such as central banks’ lending facilities, low-beta returns, embedded leveragepredatory trading, shortselling, optimal dynamic trading, and other benefits of a realistic departure from classic frictionless finance theory.

In addition to liquidity risk, my research explores the other "big" factors that drive returns across markets and asset classes: market exposure across asset class, betting against beta, quality minus junk, carry, value, momentum, and time series momentum. Indeed, safe, high-quality, high-carry, cheap, and upward-trending securities tend to outperform risky, junky, low-carry, expensive, and declining ones. These factors explain the returns of global securities, hedge funds, Warren Buffett, and much more. 

NEWS

Mar-14 Talk explaining the 2013 Nobel Prize for society of economics students
Oct-13 The Nobel Prize Committee’s Scientific Background references Acharya and Pedersen (2005), Brunnermeier and Pedersen (2009), and Asness, Moskowitz, and Pedersen (2013) in connection with the award for asset pricing to Fama, Hansen, and Shiller
Sep-13 Banque de France-TSE Prize in Monetary Economics and Finance 2013
Aug- 13 Time Series Momentum wins the Whitebox Prize for Best Financial Research 2012
Nov- 12 Winner of Nykredit Research Prize
Oct-12 Elected to the Academia Europaea (the Academy of Europe)
Jun-12 Winner of the Michael Brennan Award for the Best Paper in the Review of Financial Studies. Read this
May-12 Awarded the Bernácer Prize to the Best E.U. Economist Under 40 Years of Age
Official press release. Speech by ECB Vice-President Constancio. Photo. Video clip. P&I. DR. JP. BT. DJF.
Apr-12 Winner of the SFI Outstanding Paper Award for the paper “Betting Against Beta”
Apr-12 Cited by Chairman Ben Benanke in a speech about liquidity spirals during the crisis
Nov-11 I was asked to give a talk with Tips on How to Succeed in Academia for ph.d. students and junior faculty
Aug- 11 Norwegian press on liquidity crises and 13 experts' advice
Dec-10 Elected as Director of the American Finance Association
Oct-10 The Nobel Prize Committee’s Scientific Background references Duffie, Garleanu, and Pedersen (2005) in connection with the award for markets with search frictions to Diamond, Mortensen, and Pissarides.
Feb-10 The Economist writes about my research on liquidity risk and the rush the exit in financial markets
Dec-09 Barron’s writes about the “liquidity movement” (local link)
Nov-09 Theory of liquidity spirals mentioned in Wall Street Journal
Sep-09 OpEd: Saving free markets from market failure: institutions and liquidity are crucial in Forbes. Chinese version, Sina: 佩德森:避免自由市场失灵
Sep-09 David Levine mentions my research on liquidity risk in The Huffington Post
Sep-09 My paper When Everyone Runs for the Exit is discussed by Tom Cooley in Forbes
Aug-09 New York Times writes about my paper on the crisis, the quant event, and what happens When Everyone Runs for the Exit
Jul-09 Marketwatch features the paper Value and Momentum Everywhere
May-09 Forbes features my paper on Carry Trades and Currency Crashes
Apr-09 NASDAQ stock market closing bell on Times Square
Jan-09 OpEd: A proposal to prevent wholesale financial failure in Financial Times with Nouriel Roubini
Dec-08 New York Times writes about my research on liquidity risk
Oct-08 Talks at IMF and Federal Reserve Board on the liquidity crisis - slides here
Oct-08 Blog entry on the current crisis at Stern on Finance and VoxEU
Oct-08 Appointed to the NASDAQ OMX Economic Advisory Board
Oct-08 Quoted in the American Banker (comment on equity participation turned out true the next day)
Sep-08 New York Times writes about my new paper on Value and Momentum Everywhere
Apr-08 IMF's Global Financial Stability Report uses my papers on risk management and funding liquidity
Aug-07 The Economist writes about my paper on Market Liquidity and Funding Liquidity
Misc. Media mention in Germany, Norway, and my home country Denmark including various TV and radio

http://www.economist.com/node/15474125
When the river runs dry: The perils of a sudden evaporation of liquidity