Marty Gruber’s scientific contributions

Large market-wide price movements cannot be completely diversified away by investors. Consequently, expected returns should be higher for stocks that crash heavily during market crashes or stocks that have their best payoffs dur-ing market booms. Over the period 1967 to 2004, a zero-investment strategy isolating crash risk returns 6% per annum and a strategy isolating boom risk delivers 7.5%. These returns are not reward for bearing overall market, size, book-to-market or momentum risk. Intriguingly, these effects are concentrated in the period following the crash of Oct 19th, 1987 and the returns to the crash strategy can be predicted by the skew in implied volatilities for S&P 500 index put options.

When voting in a company's shareholder meetings, mutual fund families which hold more debt than equity in that company vote differently on certain types of proposi-tions than families which hold relatively more equity. I conclude that these classes of propositions do not affect bondholders and stockholders in the same way, and infer how bondholders would vote on these propositions if they had the vote. I find that there are three types of propositions which affect bondholders differently from equityholders: the authorization of new common and preferred stock, the approval of pay-for-performance schemes, and the removal of anti-takeover defences.