Bryan Kelly, an assistant professor of finance at the University of Chicago Booth School of Business, has won the inaugural AQR Insight Award. The award, sponsored by AQR Capital Management, recognizes an unpublished research paper that provides the most significant, new practical insights for tax-exempt institutional or taxable investor portfolios.
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Kelly was honored for his paper “Market Expectations in the Cross Section of Present Values,” which predicts market returns more accurately over one-month and one-year time horizons. The research was written with Seth Pruitt, an economist at the Federal Reserve Board.
Though many academic finance papers are written each year, the AQR Insight Award is given to the research that best addresses the real-world challenges investors face in asset allocation, security selection, portfolio implementation, risk management and other areas, the company said.
Cliff Asness, managing principal at AQR, and a Chicago Booth MBA (1991) and PhD (1994), said: “We created this award both to give back to the academic community, and to make sure we stay absolutely current with the latest and greatest research. Bryan’s work easily passes that last test. It is a novel methodology that has the potential to improve our ability to, among other things, make market forecasts.”
Kelly’s and Pruitt’s research uses disaggregated valuation ratios to predict market returns more accurately. “While aggregate measures such as the market’s overall book-to-market ratio can contain predictive information, we find significantly more predictability when using price ratios of individual stocks,” Kelly said. Their paper was chosen by AQR as the best of several hundred submissions from 24 countries.
Kelly joined the Chicago Booth faculty in 2010 and concentrates his research on theoretical and empirical asset pricing, and financial econometrics.
He is associate editor of the Journal of Financial Econometrics and a faculty research fellow at the National Bureau of Economic Research. His recent research includes “Too-Systemic-To-Fail: What Option Markets Imply About Sector-Wide Government Guarantees” (with H. Lustig and S. Van Nieuwerburgh), which was awarded the 2012 JP Morgan Award for Best Paper on Financial Institutions and Markets by the Western Finance Association.
Earlier this academic year Kelly taught an MBA course in investments.
Before receiving a PhD from the Stern School of Business at New York University, Kelly worked at Morgan Stanley in the investment banking division and at UBS in the sales and trading division.
—Prof. Jacqueline Stewart
