Professor Lubos Pastor’s brilliant and varied research has been consistently referenced on this podcast. From how politics impacts stock returns to measuring the skill of active fund managers, Lubos joins us today as we explore some of the ‘greatest hits’ of his research. With Lubos’s position on the board of the Slovakian Central bank, we ask him about how quantitative easing can be used to strengthen the economy. His answers highlight how easing can prop up asset prices and raise inflation — and why inflation is the “least bad” option to deal with post-pandemic debt. We then discuss Lubos’s research on how political cycles affect stock returns and why stock returns are higher when a Democrat is in the White House. After diving into how stock prices respond to political uncertainty, we look at why green assets tend to generate higher stock prices but low expected returns. While talking about his research on measuring volatility, Lubos argues against the conventional wisdom that stocks are stable, in the long run. We touch on how this can affect your retirement asset allocation before chatting about whether young people should use leverage. With so many people moving from active to passive and index fund investing, we analyze the relationship between the scale of active funds and the skill of active managers. Near the end of the episode, we talk about the effect that market-wide liquidity has on stock prices and why you cannot diversify away from liquidity risk. Our conversation with Lubos is filled with insights, each of which could inspire hours worth of discussion. Tune in to hear more from our discussion with Professor Lubos Pastor. Join the Rational Reminder Community - https://community.rationalreminder.ca/ Rational Reminder Website: https://rationalreminder.ca/podcast/124 Links From Today’s Episode: Professor Lubos Pastor — https://faculty.chicagobooth.edu/lubos-pastor Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Benjamin Felix on YouTube — https://www.youtube.com/channel/UCDXTQ8nWmx_EhZ2v-kp7QxA ‘50 Shades of QE: Conflicts of Interest and Economic Research’ — https://bfi.uchicago.edu/working-paper/fifty-shades-of-qe-conflicts-of-interest-in-economic-research/ ‘Political Cycles and Stock Returns’ — https://www.nber.org/papers/w23184 ‘The Presidential Puzzle: Political Cycles and the Stock Market’ — https://www.jstor.org/stable/3648176?seq=1 ‘Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections’ — https://academic.oup.com/qje/article-abstract/122/2/807/1942142?redirectedFrom=fulltext ‘The Price of Political Uncertainty: Theory and Evidence from the Option Market’ — https://www.nber.org/papers/w19812 ‘Political Uncertainty and Risk Premia’ — https://www.nber.org/papers/w17464 ‘Sustainable Investing in Equilibrium’ — https://www.nber.org/papers/w26549 ‘Are Stocks Really Less Volatile in the Long Run?’ — https://www.nber.org/papers/w14757 ‘Diversification Across Time’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1687272 ‘Scale and Skill in Active Management’ — https://www.nber.org/papers/w19891 ‘Mutual Fund Flows and Performance in Rational Markets’ — http://finance.martinsewell.com/fund-performance/BerkGreen2004.pdf ‘Judging Fund Managers by the Company They Keep’ — https://www.nber.org/papers/w9359 ‘Using the Ownership Lens to Select Funds’ — https://www.morningstar.com/articles/950109/using-the-ownership-lens-to-select-funds ‘Buffett’s Alpha’ — https://www.nber.org/system/files/working_papers/w19681/w19681.pdf ‘Liquidity Risk and Expected Stock Returns’ — https://www.nber.org/papers/w8462 ‘Liquidity Risk After 20 Years’ — https://www.nber.org/papers/w25774