“Our lives begin to end the day we become silent about things that matter.”
Martin Luther King, Jr.
Area of concentration: Asset pricing, applied theoretical and empirical, in connection with macroeconomics, corporate finance, labor economics, computational economics, and capital markets research in accounting
Lectures on the investment CAPM | Lecture 1: The q-factor model | Lecture 2: The structural investment CAPM | Lecture 3: Quantitative investment theories | Lecture 4: The big picture: Past, present, and future
Research Summary: Exploring asset pricing anomalies, 2014, NBER Reporter 1, 17-19.
Essays on the cross-section of returns, 2002, The Wharton School, University of Pennsylvania
Hou, Kewei, Chen Xue, and Lu Zhang, 2016, A comparison of new factor models. Second Prize, the 22nd Chicago Quantitative Alliance (CQA) Annual Academic Competition | Presentations at the 2015 Arizona State University Sonoran Winter Finance Conference, the 2015 Florida State University SunTrust Beach Conference, the 2015 Rodney L. White Center for Financial Research Conference on Financial Decisions and Asset Market at Wharton, the 7th McGill Global Asset Management Conference, the 2015 Financial Intermediation Research Society Conference, the 2015 Society for Financial Studies Finance Cavalcade, the 2015 University of British Columbia Summer Finance Conference, the 27th Annual Conference on Financial Economics and Accounting | HKUST Finance Symposium 2016 | Internet appendix | Slides | Shortened slides | ETF.com blog: Battle of new factor models
The Hou, Xue, and Zhang (2015) q-factor model outperforms the Fama-French (2015) five-factor model on both conceptual and empirical grounds.
Zhang, Lu, 2015, The investment CAPM
A new class of Capital Asset Pricing Models arises from the first principle of real investment for individual firms.
Bai, Hang, Kewei Hou, Howard Kung, Erica X. N. Li, and Lu Zhang, 2016, The CAPM strikes back? An investment model with disasters. Slides
An investment model with rare disasters reproduces the failure of the CAPM in explaining the value premium in finite samples in which disasters are not materialized, as well as its relative success in samples in which disasters are materialized.
The textbook Diamond-Mortensen-Pissarides model of equilibrium unemployment, once solved accurately with a globally nonlinear algorithm, gives rise endogenously to rare disasters.
A search and matching model with credible bargaining, when calibrated to the mean and volatility of unemployment in the postwar sample, can potentially explain the unemployment crisis in the Great Depression.
Zhang, Lu, 2005, Anomalies, NBER working paper 11322, runner-up, Best Paper Award at the 2005 Utah Winter Finance Conference
An economic explanation for why investment and profitability play a fundamental role in the cross section of expected stock returns.
[All articles are the sole copyright of the respective publishers. Materials are provided for educational use only]
2016 Petrosky-Nadeau, Nicolas, and Lu Zhang, Solving the DMP model accurately, conditionally accepted, Quantitative Economics.
2015 Hou, Kewei, Chen Xue, and Lu Zhang, Digesting anomalies: An investment approach, Review of Financial Studies, 28 (3), 650-705. Editor’s Choice, lead article | Internet appendix | Lecture notes | Oxford University Press blog: A new benchmark for estimating expected stock returns | ETF.com blog: Passive investing’s foundations
2014 Tang, Yue, Jin (Ginger) Wu, and Lu Zhang, Do anomalies exist ex ante?, Review of Finance 18 (3), 843-875, lead article.
2011 Gulen, Huseyin, Yuhang Xing, and Lu Zhang, Value versus growth: Time-varying expected stock returns, Financial Management 40 (2), 381-407.
2011 Chen, Long, and Lu Zhang, Do time-varying risk premiums explain labor market performance?, Journal of Financial Economics 99 (2), 385-399.
2010 Li, Dongmei, and Lu Zhang, Does q-theory with investment frictions explain anomalies in the cross-section of returns?, Journal of Financial Economics 98 (2), 297-314. Lecture notes
2010 Wu, Jin (Ginger), Lu Zhang, and X. Frank Zhang, The q-theory approach to understanding the accrual anomaly, Journal of Accounting Research 48 (1), 177-223.
2009 Liu, Laura Xiaolei, Toni M. Whited, and Lu Zhang, Investment-based expected stock returns, Journal of Political Economy 117 (6), 1105-1139. Internet appendix | Gauss programs and data | Matlab programs and data | Lecture notes
2008 Liu, Laura Xiaolei, and Lu Zhang Momentum profits, factor pricing, and macroeconomic risk, Review of Financial Studies, 21 (6), 2417-2448.
2008 Lyandres, Evgeny, Le Sun, and Lu Zhang, The new issues puzzle: Testing the investment-based explanation, Review of Financial Studies 21 (6), 2825-2855. Runner-up, Barclays Global Investors Award for the Best Conference Paper at the 2005 European Finance Association Annual Meetings.
Zhang, Lu, 2014, Research Summary: Exploring asset pricing anomalies, NBER Reporter 1, 17-19.