Mathijs Cosemans is an Associate Professor of Finance at the Rotterdam School of Management, Erasmus University. Prior to joining RSM, he was a postdoctoral research fellow at the University of Amsterdam and a visiting research fellow at Harvard Business School and Columbia Business School. Mathijs obtained a Ph.D. degree from Maastricht University for his work on risk and return dynamics in stock markets. He holds a Bachelor’s and Master’s degree in Financial Economics and a Master’s degree in Econometrics from Maastricht University.

His research focuses on empirical asset pricing, behavioral finance, and financial econometrics and has been presented at the annual meetings of the American Finance Association, Western Finance Association, SFS Cavalcade, European Finance Association, Financial Management Association, Society for Financial Econometrics, and Econometric Society. His work has been published in international refereed journals such as the Review of Financial Studies and the Journal of Banking and Finance. He received research grants from Inquire Europe, Netspar, and the Society for Financial Econometrics and Best Paper awards from the Financial Management Association.

At RSM, Mathijs teaches MSc courses in Derivatives, Risk Management, and Empirical Research Methods, an MBA course in Investments, and a PhD course in Asset Pricing. He has received the Best Professor award for excellence in teaching in the MSc Finance and Investments.

RESEARCH

PUBLISHED PAPERS

Estimating Security Betas using Prior Information Based on Firm Fundamentals

Review of Financial Studies, 29, 1072-1112, 2016 (with Rik Frehen, Peter Schotman, and Rob Bauer)

We propose a hybrid approach for estimating beta that shrinks rolling window estimates towards firm-specific priors motivated by economic theory. Our method yields superior forecasts of beta that have important practical implications. First, hybrid betas carry a significant price of risk in the cross-section even after controlling for characteristics, unlike standard rolling window betas. Second, the hybrid approach offers statistically and economically significant out-of-sample benefits for investors who use factor models to construct optimal portfolios. We show that the hybrid estimator outperforms existing estimators because shrinkage towards a fundamentals-based prior is effective in reducing measurement noise in extreme beta estimates.

Conditional Asset Pricing and Stock Market Anomalies in Europe

European Financial Management, 16, 165-190, 2010 (with Rob Bauer and Peter Schotman)

This study provides European evidence on the ability of static and dynamic specifications of the Fama and French (1993) three-factor model to price 25 size-B/M portfolios. In contrast to US evidence, we detect a small-growth premium and find that the size effect is still present in Europe. Furthermore, we document strong time variation in factor risk loadings. Incorporating these risk fluctuations in conditional specifications of the three-factor model clearly improves its ability to explain time variation in expected returns. However, the model still fails to completely capture cross-sectional variation in returns as it is unable to explain the momentum effect. 

Option Trading and Individual Investor Performance

Journal of Banking and Finance, 33, 731-746, 2009 (with Rob Bauer and Piet Eichholtz)

This paper examines the impact of option trading on individual investor performance. The results show that most investors incur substantial losses on their option investments, which are much larger than the losses from equity trading. We attribute the detrimental impact of option trading on investor performance to poor market timing that results from overreaction to past stock market returns. High trading costs further contribute to the poor returns on option investments. Gambling and entertainment appear to be the most important motivations for trading options while hedging motives only play a minor role. We also provide strong evidence of performance persistence among option traders.

RESEARCH

WORKING PAPERS

Salience Theory and Stock Prices: Empirical Evidence

Journal of Financial Economics, Forthcoming (with Rik Frehen) - March 2020

2017 SFS Cavalcade North America, 2017 FMA Annual Meeting, 2017 ESSFM Gerzensee, 2016 Research in Behavioral Finance Conference

Best Paper Award in Investments, 2017 FMA Annual Meeting  

We present empirical evidence on the asset pricing implications of salience theory. In our model, investors overweight salient past returns when forming expectations about future returns. Consequently, investors are attracted to stocks with salient upsides, which are overvalued and earn low subsequent returns. Conversely, stocks with salient downsides are undervalued and yield high future returns. We find strong empirical support for these predictions in the cross-section of U.S. stocks. The salience effect is stronger among stocks with greater limits to arbitrage and during high-sentiment periods and not explained by common risk factors and proxies for lottery demand and investor attention.

Ownership Crowded with Style: Institutional Investors and Liquidity Risk

New draft coming soon (with Alessandro Beber, Michael Brandt, and Michela Verardo)

Best Paper Award, FMA Consortium on Hedge Fund Research

Insider Trading and the Fairness of Financial Markets

New draft coming soon (with Rik Frehen)

2018 ESSFM Gerzensee

TEACHING

COURSES

CONTACT

Mathijs Cosemans

Rotterdam School of Management, Erasmus University
Department of Finance, Room T08-41

P.O. Box 1738, 3000 DR, Rotterdam, The Netherlands

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+31-10-4089095 (office)

+31-10-4082790 (secretary)

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www.mathijscosemans.com