What are the determinants of firms' market value? We incorporate quasi-fixed labor and intangible capital inputs into the neoclassical model of investment, and estimate the contribution of each input for explaining firms' market value. Using the generalized method of moments, we estimate that,...

In standard production based models labor income volatility is far too high and equity return volatility is far too low (excess volatility puzzle). We show that a simple modification of the standard model - infrequent renegotiation of labor income - allows the model to match both the smoother...