Ralph S.J. Koijen, a professor of finance at University of Chicago Booth School of Business, and Xavier Gabaix, a professor of economics and finance at Harvard University, are winners of the 2021 AQR Insight Award, which honors exceptional academic papers offering original, intelligent and innovative approaches to issues in the investment world.
In their paper, "In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis," the authors established a method in which to analyze market fluctuations and explore how the quantity of something traded affects its price.
The paper concluded that prices respond to traded quantities far more than standard economic theories have previously implied, thereby establishing a framework for better understanding how and why prices move within markets.
Messrs. Gabaix and Koijen shared a $50,000 prize.
Additionally, two papers tied for second place. One was "Five Facts About Beliefs and Portfolios" by Stefano Giglio, a professor of finance at Yale School of Management; Matteo Maggiori, an associate professor of finance at Stanford University Graduate School of Business; Johannes Stroebel, a professor of finance at New York University Leonard N. Stern School of Business; and Stephen Utkus, a principal and director of Vanguard Group's Vanguard Center for Investor Research.
The other was "Sustainable Investing in Equilibrium" by Lubos Pastor, a professor of finance at University of Chicago Booth School of Business; Robert F. Stambaugh, a professor of finance and economics at University of Pennsylvania's Wharton School; and Lucian A. Taylor, an associate professor also at of UPenn's Wharton School. Each second-place paper was awarded $25,000.
"In one of the most competitive years since the award's inception, these winning papers each reflected significant and practical applications of academic research," said David G. Kabiller, co-founder and head of business development at AQR Capital Management in a news release announcing the winners. "That so many of our Insight Award winners go on to be published in the leading journals speaks to the standard of excellence the AQR Insight Award continues to represent and the academic community's high regard for the award."
"Five Facts About Beliefs and Portfolios" shares the findings of a survey conducted among wealthy retail investors and offers guidance on designing a macrofinance model. "Sustainable Investing in Equilibrium" gives environmental, social and governance investing a rigorous systematic test.
After narrowing the finalists down to five papers, the authors of those papers were invited to present their research to AQR's senior members, who then deliberated and chose the winners.
The remaining papers in the top five that earned honorable mention were "A Quantity-Driven Theory of Term Premia and Exchange Rates" by Robin Greenwood, Samuel G. Hanson, Jeremy C. Stein and Adi Sunderam; and "Deep Learning in Asset Pricing" by Luyang Chen, Markus Pelger and Jason Zhu.
AQR had about $140 billion in assets under management as of March 31.
