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John Cochrane, Hoover Institution, Stanford University and NBER




Several important groups of capital market investors, including public and private defined benefit pension plans, sovereign wealth funds, and endowments associated with foundations, colleges, and universities, have very long investment horizons. In some cases, for example for universities, these long horizons are the result of an institutional mission to serve current and future generations. In others, the long horizon results from liability-driven investing in the presence of very long-duration liabilities.

How well does standard investment theory capture the key tradeoffs facing these investors? The theory of intertemporal portfolio choice suggests that hedging against future deterioration in the investment opportunity set is more important for long- than for short-horizon investors. The extent to which such hedging translates into differences in asset allocation and portfolio holdings is an empirical question. How do long-horizon investors affect asset prices and the performance of capital markets? Does the presence of these investors, who may be more concerned with issues of corporate governance and with a range of low-probability but high-cost risk factors than investors with shorter horizons, affect firm behavior?

To spur research on the theory and practice of long-term investing, and with the generous support of the Norwegian Finance Initiative, in 2016 the NBER launched a project on New Developments in Long-Term Asset Management. The fifth research conference in this series was held virtually on January 21-22, 2021. The keynote address at this conference was delivered by NBER Research Associate John Cochrane, the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution at Stanford University. His talk began with the observation that there are substantial differences between the lessons of modern portfolio theory and many of the practices of long-term investors. He then asked whether there are missing elements of the theory that are suggested by the behavior of practitioners, whether there are elements of the theory that practitioners should incorporate in their investment decisions, and more generally whether there are ways to better connect theory and practice regarding long-term investing.

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Participants

Simona Abis, Columbia University
Joshua Aizenman, University of Southern California and NBER
John Ameriks, The Vanguard Group
Torben G. Andersen, Northwestern University and NBER
Christopher S. Anderson, Federal Reserve Board
Aleksandar Andonov, University of Amsterdam
Ian R. Appel, University of Virginia
Patrick Augustin, McGill University
Jennie Bai, Georgetown University and NBER
Malcolm Baker, Harvard University and NBER
Brad Barber, University of California at Davis
Francesca Bastianello, University of Chicago
David S. Bates, University of Iowa and NBER
Marianne Baxter, Boston University and NBER
Lucian A. Bebchuk, Harvard University and NBER
Bo Becker, Stockholm School of Economics
Juliane Begenau, Stanford University and NBER
Itzhak Ben-David, The Ohio State University and NBER
Vincent Bogousslavsky, Boston College
Tim Bollerslev, Duke University and NBER
Patrick Bolton, Columbia University and NBER
Alon Brav, Duke University and NBER
Marie Briere, Amundi Asset Management
Dirk Broeders, De Nederlandsche Bank
Adrian Buss, INSEAD
Ricardo J. Caballero, Massachusetts Institute of Technology and NBER
John Y. Campbell, Harvard University and NBER
Edwin Cass, Canada Pension Plan Investment Board
Indraneel Chakraborty, University of Miami
Hui Chen, Massachusetts Institute of Technology and NBER
Sergey Chernenko, Purdue University
Mikhail Chernov, University of California, Los Angeles and NBER
Michael Chin, Norges Bank Investment Management
Souphala Chomsisengphet, Office of the Comptroller of the Currency
John H. Cochrane, Stanford University and NBER
George M. Constantinides, University of Chicago and NBER
Magnus Dahlquist, Stockholm School of Economics
Joseph Davis, The Vanguard Group
Victor DeMiguel, London Business School
Francis X. Diebold, University of Pennsylvania and NBER
Elroy Dimson, University of Cambridge
Michael P. Dooley, University of California, Santa Cruz and NBER
Wenxin Du, University of Chicago and NBER
Janice C. Eberly, Northwestern University and NBER
Paul Ehling, BI - Norwegian Business School
Andrea L. Eisfeldt, University of California, Los Angeles and NBER
Wayne E. Ferson, University of Southern California and NBER
Francesco Franzoni, Swiss Finance Institute
Kenneth R. French, Dartmouth College and NBER
Xavier Gabaix, Harvard University and NBER
Nicolae B. Gârleanu, Washington University in St. Louis and NBER
Joseph J. Gerakos, Dartmouth College
Simon Gervais, Duke University
Fabio Ghironi, University of Washington and NBER
Stefano Giglio, Yale University and NBER
Thomas J. Gilbert, University of Washington
Francisco Gomes, London Business School
Todd Gormley, Washington University in St. Louis
Daniel Greenwald, Massachusetts Institute of Technology
Robin Greenwood, Harvard University and NBER
Mark Grinblatt, University of California, Los Angeles and NBER
Valentin Haddad, University of California, Los Angeles and NBER
Yariv Haim, Sparrow Capital
Samuel M. Hartzmark, Boston College and NBER
Espen Henriksen, Norwegian Business School
Peter Blair Henry, Stanford University
Elizabeth Hewitt, Sloan Foundation
Robert J. Hodrick, Columbia University and NBER
Harrison Hong, Columbia University and NBER
Christopher M. Hrdlicka, University of Washington
Allen Hu, Yale University
Jennifer Huang, Cheung Kong Graduate School of Business
Antti Ilmanen, AQR
Victoria Ivashina, Harvard University and NBER
Howell Jackson, Harvard University
Ravi Jagannathan, Northwestern University and NBER
Erica Xuewei Jiang, University of Southern California
Michael Johannes, Columbia University
Marcin Kacperczyk, Imperial College London
Kathryn Kaminski, AlphaSimplex Group LLC
Steven N. Kaplan, University of Chicago and NBER
Anil K Kashyap, University of Chicago and NBER
Yann Koby, Brown University
Ralph S. J. Koijen, University of Chicago and NBER
Natalia Kovrijnykh, Arizona State University
Roman Kräussl, University of Luxembourg
Arvind Krishnamurthy, Stanford University and NBER
Randall S. Kroszner, University of Chicago and NBER
Theresa Kuchler, New York University and NBER
Spencer Yongwook Kwon, Harvard University
Owen Lamont, Wellington Management
Jaewoo Lee, International Monetary Fund
Christian Leuz, University of Chicago and NBER
Richard M. Levich, New York University and NBER
Doron Y. Levit, University of Washington
Jonathan Lewellen, Dartmouth College and NBER
Karen K. Lewis, University of Pennsylvania and NBER
Feifei Li, Research Affiliates
Jian Li, Columbia University
Lise Lindbäck, The Norwegian Finance Initiative
Anton Lines, Columbia University
Canyao Liu, Yale University
Lars A. Lochstoer, University of California, Los Angeles and NBER
Dong Lou, London School of Economics
Sydney C. Ludvigson, New York University and NBER
Hanno Lustig, Stanford University and NBER
N. Gregory Mankiw, Harvard University and NBER
Egor V. Matveyev, Massachusetts Institute of Technology
Rajnish Mehra, Arizona State University and NBER
Lars Meuller, Canada Pension Plan Investment Board
Alexander Michaelides, Imperial College London
Randall Morck, University of Alberta and NBER
Alan Moreira, University of Rochester and NBER
Tobias J. Moskowitz, Yale University and NBER
Lira Mota, Massachusetts Institute of Technology
Claus Munk, Copenhagen Business School
Borghan Narajabad, Federal Reserve Board
Giovanna Nicodano, University of Turin
Michaela Pagel, Columbia University and NBER
Emiliano Pagnotta, Imperial College London
Jun Pan, Shanghai Jiao Tong University
Cecilia Parlatore, New York University and NBER
Lubos Pastor, University of Chicago and NBER
Anna Pavlova, London Business School
Carolin Pflueger, University of Chicago and NBER
Ludovic Phalippou, University of Oxford
Monika Piazzesi, Stanford University and NBER
Christopher Polk, London School of Economics
James M. Poterba, Massachusetts Institute of Technology
Pavol Povala, Norges Bank Investment Management
Nagpurnanand R. Prabhala, Johns Hopkins University
Alessandro Previtero, Indiana University and NBER
Seth Pruitt, Arizona State University
Tarun Ramadorai, Imperial College London
Joshua Rauh, Stanford University and NBER
Enrichetta Ravina, Federal Reserve Bank of Chicago
Alessandro Rebucci, Johns Hopkins University and NBER
Jonathan Reuter, Boston College and NBER
Robert J. Richmond, New York University
David T. Robinson, Duke University and NBER
Roberta Romano, Yale University and NBER
Kasper Roszbach, Norges Bank
Kunal Sachdeva, Rice University
Lukas Schmid, University of Southern California
Lawrence Schmidt, Massachusetts Institute of Technology
Til Schuermann, Oliver Wyman
Scott Schuh, West Virginia University
Eduardo S. Schwartz, University of California, Los Angeles and NBER
G. William Schwert, University of Rochester and NBER
Clemens Sialm, University of Texas at Austin and NBER
Ina Simonovska, University of California, Davis and NBER
Alp Simsek, Yale University and NBER
Kenneth J. Singleton, Stanford University and NBER
Emil Siriwardane, Harvard University and NBER
Paolo Sodini, Stockholm School of Economics
Dongho Song, Johns Hopkins University
Chester S. Spatt, Carnegie Mellon University and NBER
Robert F. Stambaugh, University of Pennsylvania and NBER
Jeremy C. Stein, Harvard University and NBER
Adi Sunderam, Harvard University and NBER
Lucian A. Taylor, University of Pennsylvania
Sheridan Titman, University of Texas at Austin and NBER
Tuomas Tomunen, Boston College Carroll School of Management
Margarita Tsoutsoura, Washington University in St. Louis and NBER
Raman Uppal, Edhec Business School
Stephen Utkus, University of Pennsylvania
Boris Vallee, Harvard University
Stijn Van Nieuwerburgh, Columbia University and NBER
Kaushik Vasudevan, Yale University
Andrea Vedolin, Boston University and NBER
Nathanaël Vellekoop, University of Toronto
Stéphane Verani, Federal Reserve Board
Michela Verardo, London School of Economics
Luis M. Viceira, Harvard University and NBER
Vikrant Vig, Northwestern University and NBER
Vegard Vik, Norges Bank Investment Management
Annette Vissing-Jorgensen, Federal Reserve Board and NBER
Jiang Wang, Massachusetts Institute of Technology and NBER
Neng Wang, Columbia University and NBER
Michael Weber, University of Chicago and NBER
Shang-Jin Wei, Columbia University and NBER
Fredrik Willumsen, Norges Bank Investment Management
Jing Jian Xiao, University of Rhode Island
Kairong Xiao, Columbia University
Yishay Yafeh, Hebrew University
Mao Ye, Cornell Johnson Graduate School of Management and NBER
Motohiro Yogo, Princeton University and NBER
Yao Zeng, University of Pennsylvania
Lu Zhang, The Ohio State University and NBER
Stanley E. Zin, New York University and NBER

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