Contact: 

Católica Lisbon School of Business and EconomicsPalma de Cima, room 5303 A1649-023 Lisboae-mail: pedro.barroso@ucp.pt

Pedro is a Finance Associate Professor (with Aggregation) at Católica-Lisbon School of Business and Economics. Before he held positions as (tenured) Senior Lecturer at UNSW in Sydney and Lecturer at University of Exeter (UK). He was also a visiting scholar at Bayes Business School (formerly Cass) in the city of London and University of Liechtenstein. Pedro holds a Finance PhD from Nova SBE, a 'Mestrado' (MSc) in International Economics and a 'Licenciatura' (MA) in Economics, both from ISEG. Pedro's work is mainly in empirical asset pricing / investments, anomalies, risk management, the foreign exchange market, and portfolio management. Pedro's research has been published (by chronological order) at the Journal of Financial and Quantitative Analysis, the Journal of Financial Economics, Management Science, and the Review of Financial Studies. Besides research and teaching, Pedro has provided extensive consulting services for a derivatives exchange. 




Links: Google scholar profile here.SSRN page here.Católica-Lisbon SBE page here. Curriculum: CV.

Publications: 

Momentum Has its Moments, with Pedro Santa-Clara.  Journal of Financial Economics, volume 116, Issue 1, April 2015, Pages 111-120.

Beyond the Carry Trade: Optimal Currency Portfolios, with Pedro Santa-Clara, 2015, Journal of Financial and Quantitative Analysis, volume 50, Issue 5, pages 1037-1056. 

Time-Varying State Variable Risk Premia in an ICAPM, with Paul Karehnke and Martijn Boons. Journal of Financial Economics, 2021, 139(2), 428-451. 

Do Limits to Arbitrage Explain the Benefits of Volatility-Managed Portfolios?, with Andrew Detzel., 2021, Journal of Financial Economics, 140(3), 744-767. 

Lest we forget: Learn from Out-Of-Sample Forecast Errors When Optimizing Portfolios,  with Konark Saxena,  the Review of Financial Studies, volume 35, Issue 3, March 2022, pages 1222-1278. 

Hedging with an Edge: Parametric Currency Overlay, with Jurij-Andrei Reicheneker and Marco Josef Menichetti. Management Science, 2022, 68(1), 669-689. 

Crowding and Tail Risk in Momentum Returns, with Paul Karehnke and Roger M. Edelen,  2021, Journal of Financial and Quantitative Analysis,  Volume 57 , Issue 4,  pp. 1313 - 1342.  

Reproducibility in Management Science. Fišar, M., Greiner, B., Huber, C., Katok, E., Ozkes, A., and the Management Science Reproducibility Collaboration (forthcoming). Management Science.  Note: Member of the Management Science Reproducibility Collaboration 

The risk-return tradeoff among equity factors with Paulo Maio, 2024, Journal of Empirical Finance (accepted).

Pedro Barroso

Working papers:

The Volatility Puzzle of the Low-Risk Anomaly, with Andrew Detzel and Paulo Maio (Revise & Resubmit at the JFE)

Abstract: This paper shows that leading theories of the low-risk anomaly fail to provide a complete explanation for the anomaly’s conditional performance. Sharpe ratios and abnormal returns of betting-against-beta (BAB) and -idiosyncratic volatility (BAV) factors rise significantly following low volatility months, even when controlling for lottery preferences, and in the case of BAB, also controlling for mispricing and limits to arbitrage. Moreover, the leverage constraints theory counterfactually predicts that market and BAB Sharpe ratios increase with volatility. We also show that highly active institutions shift from high- to low-beta stocks as volatility increases, suggesting their demand contributes to the performance of BAB. 

Conferences / Seminars:  EFMA 2017 (winner of the WRDS best paper award), Spanish Finance Association 2017, Australasian Banking and Finance Conference 2017, IESE, ESADE, Paris-Dauphine, QUT, Frontiers of Factor Investing Conference at University of Lancaster 2018, 2021 Portuguese Finance Network, 2021 fourteenth annual Risk Management Conference in Singapore, CICF 2022. 


Cutting the Gordian Knot of Carry and Imbalances, with Frickson Kho, Florent Rouxelin, and Li Yang

Abstract: Countries' external imbalances or interest rates produce similar currency sorts on average. Disentangling the two signals, we find that carry risk premiums come entirely from interest rates. An alternative carry formed on interest rates orthogonal to external imbalances increases the Sharpe ratio by 38% and is not spanned by traditional carry or imbalance factors. Strikingly, this new orthogonal carry subsumes traditional carry. Traditional carry has well-known exposure to stock market returns and performs badly when FX volatility is high. We find these stylized facts are driven entirely by its association with imbalances factors which have similar risk attributes while orthogonal carry does not. 

Conferences / Seminars: 2016 Australasian Finance and Banking Conference (AFBC), 2016 UNSW Business School Research Fair, 2017 China International Conference in Finance (CICF), 2018 European Financial Management Association annual meeting in Milan, Spanish Finance Association XXVI Finance Forum in 2018, Católica Porto Business School, University of Queensland (Australia), and Massey University (New Zealand), 2021 Annual meeting of the Portuguese Economics Journal.


What Explains Price Momentum and 52-Week High Momentum When They Really Work?, with Haoxu Wang

Abstract: Price momentum and 52-week high are two robust relative strength stock market anomalies. Recent studies argue both anomalies are well explained by the q-factor model. We compare this explanation with a behavioral mispricing model and fundamental momentum. Unconditionally, all models subsume the anomalies. Yet, the bulk of momentum profits is known to be predictable and occurs after periods of low-risk and bull markets. In this study, we compare models explaining the anomalies in a conditional setting, focusing on when the anomalies actually work, and document that: i) 52-week high has predictability similar to momentum; ii) factor models that explain both anomalies unconditionally generally fail to capture them after low-risk months; iii) time-varying loadings to the investment CAPM are inconsistent with the observed pattern of predictability. The best model to fit these conditional patterns is fundamental momentum of Novy-Marx (2015a) but it also does not fully explain observed time-variation in risk-adjusted returns.

Conferences / Seminars: 2020 Australasian Finance and Banking Conference (AFBC), 2021 Católica-Lisbon School of Business and Economics, CICF 2021, New Zealand Finance meeting 2021, FMA US annual meeting 2021, EFMA 2021, FMA Europe 2021, University of Liechtenstein, 2022 annual Risk Management Conference in Singapore (NUS), CEPR Advanced Forum for Financial Economics (CAFFE), ESCP, University of Liverpool Management School, Santander Corporate and Investment Banking.  

 

An International Equity and Currency Optimisation with Frictions , with Jurij-Andrei Reichenecker, Michael R. Reichenecker and Florent Rouxelin

Abstract: This study proposes a novel joint optimization approach for international portfolios, optimizing the allocation of stocks and exposure to currencies. We employ several equity characteristics including momentum, value, and size for equity allocation and carry trade, currency momentum, and currency value characteristics for currency allocation. Our out-of-sample analysis finds a 55% increase in the portfolios' Sharpe ratio, after transaction and rebalancing costs, compared to the benchmark, with no significant impact on overall volatility. This research highlights the importance of jointly optimizing both equity and currency strategies in portfolio construction, offering insights to international investors aiming to improve their risk-adjusted returns. 

Conferences / Seminars: 2018 Portuguese Finance Network conference (PFN), 2019 International Risk Management Conference in Milan, 2019 Infiniti Conference in Glasgow, Lancaster University Management School, TUM School of Management in Munich, Universidade de Macau, University of Strathclyde, 2022 FMA Applied Finance Conference at St. John's University in New York, FMA Europe 2022, 2022 fifteenth annual Risk Management Conference in Singapore (NUS), FMA USA 2023. 

News:

February 16, 2016 - My research on momentum featured in BusinessThink, UNSW's Business newsletter: https://www.businessthink.unsw.edu.au/articles/next-wave-yes-momentum-investing-can-be-rewarding . 

July 1, 2016 - Opinion article on Brexit in Jornal de Negocios (the leading Economics / Business newspaper in Portugal): http://www.jornaldenegocios.pt/opiniao/detalhe/brexit_quanto_custa.html 

July 1, 2017 - My joint paper with Paulo Maio Managing the Risk of the 'Betting-Against-Beta' Anomaly: Does It Pay to Bet Against Beta? won the WRDS Best Conference paper award in EFMA 2017.

January 17, 2018 - My post on CFA's blog on managing the risk of momentum and other factors: https://blogs.cfainstitute.org/investor/2018/01/17/timing-the-market-momentum-and-beyond/ 

February 16, 2021 - My opinion on bitcoin prices in the news in Antena 1 (around minute 7:30)- https://www.rtp.pt/noticias/noticiario-antena1/15h00-edicao-de-nuno-carvalho_a1_1297910