Robert F. Stambaugh

Robert F. Stambaugh
  • Miller Anderson & Sherrerd Professor of Finance, Professor of Economics

Contact Information

  • office Address:

    3251 Steinberg-Dietrich Hall
    3620 Locust Walk
    Philadelphia, PA 19104

Research Interests: asset pricing, investments, econometrics

Links: CV, Personal Website


Robert Stambaugh is the Miller Anderson & Sherrerd Professor of Finance at the Wharton School of the University of Pennsylvania.   He is a Fellow and former President of the American Finance Association, a Fellow of the Financial Management Association, and a Research Associate of the National Bureau of Economic Research.  Professor Stambaugh has been the editor of the Journal of Finance, an editor of the Review of Financial Studies, an associate editor of those journals as well as the Journal of Financial Economics, and a member of the first editorial committee of the Annual Review of Financial Economics.   He has published articles on topics including return predictability, asset pricing tests, portfolio choice, parameter uncertainty, liquidity risk, volatility, performance evaluation, investor sentiment, and active-versus-passive investing.  His research awards include a Smith-Breeden first prize for an article in the Journal of Finance as well as a Fama-DFA first prize and three second prizes for articles in the Journal of Financial Economics.  Before joining Wharton in 1988, he was Professor of Finance at the University of Chicago, where he received his PhD in 1981.   Professor Stambaugh visited Harvard University as a Marvin Bower Fellow in 1997-98.

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  • Lubos Pastor, Robert F. Stambaugh, Luke Taylor (2019), Sustainable Investing in Equilibrium, Journal of Financial Economics, forthcoming.

    Abstract: We model investing that considers environmental, social, and governance (ESG) criteria. In equilibrium, green assets have low expected returns because investors enjoy holding them and because green assets hedge climate risk. Green assets nevertheless outperform when positive shocks hit the ESG factor, which captures shifts in customers' tastes for green products and investors' tastes for green holdings. The ESG factor and the market portfolio price assets in a two-factor model. The ESG investment industry is largest when investors' ESG preferences differ most. Sustainable investing produces positive social impact by making firms greener and by shifting real investment toward green firms.

  • Jianan Liu, Robert F. Stambaugh, Yu Yuan (2019), Size and Value in China, Journal of Financial Economics, 134, pp. 48-69.

    Abstract: We construct size and value factors in China.  The size factor excludes the smallest 30% of firms, which are companies valued significantly as potential shells in reverse mergers that circumvent tight IPO constraints.  The value factor is based on the earnings-price ratio, which subsumes the book-to-market ratio in capturing all Chinese value effects.  Our three-factor model strongly dominates a model formed by just replicating the Fama and French (1993) procedure in China.  Unlike that model, which leaves a 17% annual alpha on the earnings-price factor, our model explains most reported Chinese anomalies, including profitability and volatility anomalies.

  • Lubos Pastor, Robert F. Stambaugh, Luke Taylor (2019), Fund Tradeoffs, Journal of Financial Economics, forthcoming.

    Abstract: We study tradeoffs among active mutual funds' characteristics. In both our equilibrium model and the data, funds with larger size, lower expense ratio, and higher turnover hold more-liquid portfolios. Portfolio liquidity, a concept introduced here, depends not only on the liquidity of the portfolio's holdings but also on the portfolio's diversification. We also confirm other model-predicted tradeoffs: Larger funds are cheaper. Larger and cheaper funds are less active, based on our new measure of activeness. Better-diversified funds hold less-liquid stocks; they are also larger, cheaper, and trade more. These tradeoffs provide novel evidence of diseconomies of scale in active management.

  • Lubos Pastor and Robert F. Stambaugh (2019), Liquidity Risk after 20 Years, Critical Finance Review, 8, pp. 277-299.

    Abstract: The Critical Finance Review commissioned Li, Novy-Marx, and Velikov (2017) and Pontiff and Singla (2019) to replicate the results in Pastor and Stambaugh (2003). Both studies successfully replicate our market-wide liquidity measure and find similar estimates of the liquidity risk premium.  In the sample period after our study, the liquidity risk premium estimates are even larger, and the liquidity measure displays sharp drops during the 2008 financial crisis. We respond to both replication studies and offer some related thoughts, such as when to use our traded versus non-traded liquidity factors and how to improve the precision of liquidity beta estimates.

  • Robert F. Stambaugh (Working), Skill and Fees in Active Management.

    Abstract: Greater skill of active investment managers can mean less fee revenue in equilibrium. Although more-skilled managers receive more revenue than less-skilled managers, greater skill for active managers overall can imply less revenue for their industry. Greater skill allows managers to identify mispriced securities more accurately and thereby make better portfolio choices. Greater skill also means, however, that active management corrects prices better and thus reduces managers’ return opportunities. The latter effect can outweigh managers’ better portfolio choices in a general equilibrium. Investors then rationally allocate less to active funds and more to index funds if active management is more skilled.

  • Jianan Liu, Robert F. Stambaugh, Yu Yuan (2018), Absolving Beta of Volatility’s Effects, Journal of Financial Economics, 128, pp. 1-15.

  • Xiaomeng Lu, Robert F. Stambaugh, Yu Yuan (Working), Anomalies Abroad: Beyond Data Mining.

    Abstract: A pre-specified set of nine prominent U.S. equity return anomalies produce significant alphas in Canada, France, Germany, Japan, and the U.K.  All of the anomalies are consistently significant across these five countries, whose developed stock markets afford the most extensive data. The anomalies remain significant even in a test that assumes their true alphas equal zero in the U.S.  Consistent with the view that anomalies reflect mispricing, idiosyncratic volatility exhibits a strong negative relation to return among stocks that the anomalies collectively identify as overpriced, similar to results in the U.S.

  • Robert F. Stambaugh and Yu Yuan (2017), Mispricing Factors, Review of Financial Studies, 30, pp. 1270-1315.

    Abstract: A four-factor model with two “mispricing” factors, in addition to market and size factors, accommodates a large set of anomalies better than notable four- and five-factor alternative models. Moreover, our size factor reveals a small-firm premium nearly twice usual estimates. The mispricing factors aggregate information across 11 prominent anomalies by averaging rankings within two clusters exhibiting the greatest co-movement in long-short returns. Investor sentiment predicts the mispricing factors, especially their short legs, consistent with a mispricing interpretation and the asymmetry in ease of buying versus shorting. Replacing book-to-market with a single composite mispricing factor produces a better-performing three-factor model.

  • Robert F. Stambaugh (Working), Noisy Active Management.

    Abstract: Lower skill of the active management industry can imply greater fee revenue, value added, and investor performance. Such outcomes arise in a competitive equilibrium in which portfolio choices of active managers partially echo those of noise traders and also contain manager-specific noise. Both sources of noise reduce managers' skill to identify mispriced securities and thereby produce alpha. However, lower skill also means a given amount of active management corrects prices less and thus competes away less alpha. The latter effect can outweigh managers' poorer portfolio choices, so that investors rationally allocate more to active management when its skill is lower.

  • Lubos Pastor, Robert F. Stambaugh, Lucian A. Taylor (2017), Do Funds Make More When They Trade More?, Journal of Finance, 72, pp. 1483-1528.

    Abstract: We find that active mutual funds perform better after trading more.  This time-series relation between a fund's turnover and its subsequent benchmark-adjusted return is especially strong for small, high-fee funds.   These results are consistent with high-fee funds having greater skill to identify time-varying profit opportunities and with small funds being more able to exploit those opportunities.   In addition to this novel evidence of managerial skill and fund-level decreasing returns to scale, we find evidence of industry-level decreasing returns:   The positive turnover-performance relation weakens when funds act more in concert.   We also identify a common component of fund trading that is correlated with mispricing proxies and helps predict fund returns.


Awards and Honors

  • AQR Insight Award honorable mention, 2019
  • Marshall Blume Prize, 2018
  • QMA Award for Best Paper on Investment Management, Western Finance Association Meetings, 2018
  • Best Paper, Jacobs-Levy Equity Management Center for Quantitative Financial Research, 2017
  • Fama-DFA Prize (first-place paper, Journal of Financial Economics), 2016
  • Marshall Blume Prize Honorable Mention, 2016
  • Best Paper, Jacobs Levy Equity Managment Center for Quantitative Financial Research, 2015
  • Marshall Blume Prize honorable mention, 2014
  • Fellow of the American Finance Association, 2014
  • Whitebox Advisors first prize, 2012
  • AQR Insight Award honorable mention, 2012
  • Marshall Blume Prize honorable mention, 2012
  • Fellow of the Financial Management Association, 2010
  • Goldman Sachs Asset Management Award (Western Finance Association), 2007
  • Moskowitz Prize honorable mention, 2003
  • Geewax-Terker Prize honorable mention, 2002
  • Fama-DFA Prize (second-place paper, Journal of Financial Economics), 2002
  • Fama-DFA Prize (second-place paper, Journal of Financial Economics), 1999
  • Fama-DFA Prize (second-place paper, Journal of Financial Economics), 1997
  • Marvin Bower Fellow, Harvard University Graduate School of Business, 1997
  • Smith-Breeden Prize (first-prize paper, Journal of Finance), 1996
  • Batterymarch Fellow, 1985

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Latest Research

Lubos Pastor, Robert F. Stambaugh, Luke Taylor (2019), Sustainable Investing in Equilibrium, Journal of Financial Economics, forthcoming.
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In the News

Has the Hedge Fund Industry Lost Its Way?

For hedge funds, poor performance, closures and large investor withdrawals are raising questions about their future. But don’t expect hedge funds to disappear anytime soon.

Knowledge @ Wharton - 2015/11/6
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Awards and Honors

AQR Insight Award honorable mention 2019
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