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I am a financial economist who loves to solve real-world problems using models and data. 

A Stanford PhD, I am a professor at Copenhagen Business School, director of the BIGFI center, and a principal at AQR. I have 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, on the Economic Advisory Boards of NASDAQ and FTSE, and on several editorial boards, including the Journal of Finance and Quarterly Journal of Economics. 

My academic awards include the Bernácer Prize to the best E.U. economist under 40 years of age, the Banque de France-TSE Prize, the Stephen A. Ross Prize, JF Brattle and DFA Prizes, JFE Fama-DFA Prizes, RFS Michael Brennan Award, and FAJ Graham and Dodd Top Awards.

My research is widely used by academics, practitioners, regulators, e.g., in the Nobel Prize committee’s scientific background and the most cited paper in SEC regulation.  

News

11/2024. How to Succeed in Academia or Have Fun Trying for ph.d. students and junior faculty, updated. Some other slides: what characterizes a Steve Ross model?

5/2024. Feel free to call me by my new name :-) I have been a big fan and subscriber of Owenomics from the start.  

3/2024. Podcast on green investment (in Danish) 

2/2024. Corporate Bond Factors: Replication Failures and a New Framework wins Utah Winter Finance Conference Best Paper Award 2024

1/2024. Is There a Replication Crisis in Finance?  wins the The Journal of Finance, Dimensional Fund Advisors Prize distinguished paper.

1/2024. Is There a Replication Crisis in Finance?  stock-level data is now easily available on WRDS, plus factors are free on the web.

9-2023. Carbon Pricing versus Green Finance wins the Swiss Finance Institute's Outstanding Paper Award. 

1/2023. I am the Director of the new Center for Big Data in Finance (BIGFI).

9/2020. SEC rulemaking relies on academic research. Most cited paper in SEC regulation releases (p. 59) is: Brunnermeier-Pedersen (2009) 

Research Summary

One research agenda is liquidity risk, showing 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 tightens. 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 leverage, predatory trading, shortselling, and the why markets are efficiently inefficient. 

Another research agenda explores the other factors that drive asset prices across markets and asset classes: betting against beta, quality minus junk, carry, size, value, momentum, time series momentum, and ESG. These factors help explain the returns of hedge funds, Warren Buffett, and global markets, and may be explained by social networks. 

A related effort studies the economics of capital markets and investment management, including sharpening the arithmetic of active management, and how to measure risk, use return signals, make optimization work, trade optimally accounting for transaction costs, and apply machine learning. 

I also show how ESG investing affects portfolio choice (ESG-efficient frontier), asset pricing (ESG-CAPM), corporate finance (ESG-Modigliani-Miller), and how green finance relates to carbon pricing. 

A final agenda studies whether finance research can be replicated, creating useful data sets for equities, corporate bonds, ESG measures, and beyond.

Disclosure Statement

In addition to being a professor, I am affiliated with AQR Capital Management, a global investment management firm, which may or may not apply similar investment techniques or methods of analysis as described in my writings; the views expressed in my writings are those of the authors and not necessarily those of AQR and should not be considered investment advice. See my vita for further details on past and current positions.

Archive

1/2023. New course on "Big Data Asset Pricing" - see lecture notes here with Theis I Jensen

1/2022. My paper on Enhanced Portfolio Optimization wins the Graham and Dodd Top Award and my paper on Deep Value wins the Bernstein Fabozzi/Jacobs Levy Award

11/2021. New version of How to Succeed in Academia or Have Fun Trying

3/2021. Game On paper featured in Risk 

2/2021. New model that helps explain GameStop and markets generally: Game On: Social Networks and Markets

2/2021. Markus’ Academy@Princeton: YouTube discussion on GameStop and Predatory Trading 

2/2021. GameStop is creating renewed interest - e.g., The Economist, Krugman, and Bloomberg - for the good old Predatory Trading paper 

1/2021. Is There a Replication Crisis in Finance? We provide the answer - plus cool new global factor data and replication code.

12/2020. Stephen A. Ross Prize awarded to DGP "Over-the-Counter Markets"

Nov-19 Short movie about Buffett's Alpha made by Financial Analysts Journal 

Jun-19 Journal of Financial Economics, Fama-DFA Prize, Second Place Winner awarded to Carry 

Jan-18 Financial Analysts Journal, Graham and Dodd Awards of Excellence: Top Award goes to Buffett's Alpha - movie 

Jan-18 Journal of Finance awards the Brattle Distinguished Paper Prize to Efficiently Inefficient Markets for Assets and Asset Management

Dec-18 Efficiently Inefficient is coming out in Japanese - get it here 

Dec-18 On the 2018 list of highly cited researchers  

Nov-18 Prize from Thule Foundation at Skandia, Sweden, for "relevant contributions to banking, insurance, and financial services"

Jun-18 Meet a Nordic prodigy - my students are going to Chicago and Bocconi this year 

Mar-18 Talk on academic impact (prepared for a workshop for CBS management) 

Feb-18 The Economist writes about my research on sharpening the arithmetic of active management 

Nov-17 The World’s Most Influential Scientific Minds 2017 (list of Highly Cited Researchers by Clarivate)

May-17 Elected to The Royal Danish Academy of Sciences and Letters 

Jan-16 On the list of The World’s Most Influential Scientific Minds 2016 

Dec-15 Efficiently Inefficient on Business News Networks’ list of top financial reads of 2015

May-15 Institutional Investor:  Are Markets Efficient or Irrational? Actually, a Bit of Both  

Feb-15 EliteForsk Award presented by H.R.H.Crown Princess Mary and the Minister for Higher Education and Science: English, Danish, press

Jan-15 New paper Size Matters, if You Control Your Junk featured in FT, Barrons, Forbes, Cliff's Perspective

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

Older Media mention in Germany, Norway, and my home country Denmark including various TV and radio

Contact

Copenhagen Business School

Department of Finance

Solbjerg Plads 3, A5

DK-2000 Frederiksberg

Denmark


Web: www.lhpedersen.com


Email: Please email my center coordinator at bigfi@cbs.dk or, for important matters, me directly at lhp.fi@cbs.dk