Center for Financial Frictions

Lasse Heje Pedersen in Berlingske on passive versus active investing - February 13, 2021
Lasse Heje Pedersen touches upon how the efficiency of the markets can change in regards to increasing passive investment flows. Read more in the article Passiv investering ændrer aktiemarkedets spilleregler - og det skaber dyb bekymring hos flere investorer.

Lasse Heje Pedersen wins JFE's Fama-DFA Best Paper Prize - June 2, 2021
Lasse Heje Pedersen, Professor at the Department of Finance and member of the Center for Financial Frictions, has won the second prize of the Fama/DFA Prize for Capital Markets and Asset Pricing in the 2020 JFE Best Paper Contests for his paper 'Betting against correlation: Testing theories of the low-risk effect'. The paper was published in 2020 in the Journal of Financial Economics and is co-authored with Clifford S. Asness (AQR Capital Management), Andrea Frazzini (AQR Capital Management) and Niels Joachim Gormsen (University of Chicago, Booth School of Business). Read more about it here.

FRIC research featured in the Wall Street Journal - January 8, 2020.
The study by Annette Vissing-Jørgensen was featured in the article Derby’s Take: Academics Take Aim at Regional Fed Banks in New Research.

FRIC research featured in the Economist - June 18, 2020.
The article New research casts light on the pandemic’s effects on resource allocation is among others based on a study co-authored by Christian Wagner.

During a presentation at an AQR conference in London, Lasse Heje Pedersen calls for honesty about ESG costs and benefits - November 28, 2019. Lasse Heje Pedersen touched upon how being honest about the costs and benefits, is the way to win the debate and promote ESG investing. Read more about it here.

David Lando spoke at the 100th anniversary conference of the first Danish bank law - October 4, 2019. Read more about it here.

FRIC research featured in Bloomberg - August 16, 2019. Research by Fabrice Tourre was featured in the Bloomberg article Falling Mortgage Rates Aren't What They Used to Be.

FRIC research featured in the Economist - April 20, 2019. The article Bond maturities are the result of a tug-of-war includes the study by Annette Vissing-Jørgensen to show that countries with larger private pension systems are able to issue long-maturity bonds more cheaply.

Susan Christoffersen in Morningstar on conflicts of interest between brokers and investors - Spring, 2019. Read more about it here.

Interview with David Lando on the Danish FSA (Finanstilsynet) and the ‘Danske Bank Scandal’

David Lando was featured in a large interview in Berlingske this week talking about the Danish Financial Supervisory Authority and its role in connection with the ‘Danske Bank scandal’. You can find the full article here (in Danish): Finanstilsynets formand svarer igen i hvidvasksag: Vi har ikke i et sekund følt os overmatchet

FRIC research forms basis for new WRDS data set
Research by Associate Professor Jens Dick-Nielsen, Center for Financial Frictions, forms the basis for a new WRDS Bond Return Database. Read more about it here.

FRIC research creates headlines

The FRIC'15 Conference took place August 24-25, 2015 and had 170 registered participants. Among the keynote speakers, the conference featured Nobel Laureate Lars Peter Hansen, University of Chicago.

To Finanswatch, Lars Peter Hansen said: ”Financial frictions is an important subject, which we may have underestimated. But it is fundamentally important how people relate to uncertainties, and the work that David (Lando, ed.) and Lasse (Heje Pedersen, ed.) do, is really at the forefront and it is also a subject that the rest of us are highly interested in". (Translated from the Danish quote).

The FRIC'15 conference was mentioned in several articles:

Kongressen.com: ”Politikerne skal turde træffe langsigtede økonomiske beslutninger”

Finanswatch: Nobelprismodtager: "Det er tåbeligt at tro, at investorer kan forstå finansielle modeller bedre end folk som mig"

Berlingske Business: Nobelmodtager: Kurspanik skyldes usikkerhed

The Wall Street Journal placed Lasse Heje Pedersen's book Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined on the list of “the books Wall Street’s smartest people think you should read this summer”, where it was recommended by Torsten Slok, ‎Chief International Economist at Deutsche Bank.

At the EFT.com, Larry Swedroe recommended Efficiently Inefficient as “a must-read for serious investors”.

Lasse Heje Pedersen also wrote an article in the Institutional Investor: Are Markets Efficient or Irrational? Actually, A Bit of Both.

Associate professor and FRIC center member Jens Dick-Nielsen was interviewed for the Global Risk Regulator in connection with his research on bond market liquidity and was subsequently invited to the OECD Financial Roundtable on liquidity in Paris.

The Global Risk Regulator is an online service from The Banker under Financial Times. Read the full article here. http://www.globalriskregulator.com/Subjects/Liquidity/Regulators-alarm-rises-on-secondary-market-liquidity (requires login to FT).

Professor Lasse Heje Pedersen received EliteForsk Award 2015 for his research on financial economics.

See the EliteForsk video about Lasse Heje Pedersen

Read the article in Finanswatch about Lasse Heje Pedersen (in Danish)

Covered bonds are considered assets of extremely high liquidity in the final EU Capital Requirement Directive draft  (CRD IV). This is a new way of considering covered bonds and research by FRIC member Jens Dick-Nielsen and co-authors has been cited as the key argument for changing the status for Danish covered bonds in CRD IV.

The new status for covered bonds follows a recent report by the European Banking Authorities (EBA). It is the EBA who will eventually decide on the exact definitions of highly liquid assets eligible for use in the calculation of the Liquidity Coverage Ratio (LCR).

The EBA report primarily cites the paper by Dick-Nielsen, Gyntelberg and Sangill (2012), when talking about covered bond liquidity and the potential methodology for how to assess the liquidity of other European covered bond markets as well.

At the moment, only Danish covered bonds fulfill the requirements for being extremely liquid. The extended definition of assets with extremely high liquidity to include covered bonds will therefore benefit both Danish financial institutions and the Danish mortgage bond market as a whole.

For more information, see the paper by Dick-Nielsen, Gyntelberg and Sangill (2012) and EBA report February 21, 2013.

Professor Lasse Heje Pedersen has uncovered the success of investment guru Warren Buffett.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”, said investment guru Warren Buffett once. Professor Lasse Heje Pedersen, researcher at the FRIC Center for Financial Frictions, has now uncovered Buffett’s success together with his colleagues Andrea Frazzini, New York University, and David Kabiller, AQR Capital Management.

See the media coverage of their papers in The Economist, September 29, 2012 and Børsen, November 5, 2012