We use a production-based asset pricing model to investigate whether financing constraints are quantitatively important for the cross-section of returns. Specifically, we use GMM to explore the stochastic Euler equation imposed on returns by optimal investment. Our methods can identify the...

This paper asks whether the asset pricing fluctuations induced by the presence of costly external finance are empirically plausible. To accomplish this, we incorporate costly external finance into a dynamic stochastic general equilibrium model and explore its implications for the properties of...

We incorporate costly external finance in an investment-based asset pricing model and investigate whether financing frictions are quantitatively important for pricing a cross-section of expected returns. We show that common assumptions about the nature of the financing frictions are captured by...

This paper asks whether the asset pricing fluctuations induced by the presence of costly external finance are empirically plausible. To accomplish this, we incorporate costly external finance into a dynamic stochastic general equilibrium model and explore its implications for the properties of...

We use a production-based asset pricing model to investigate whether financial market imperfections are quantitatively important for pricing the cross-section of returns. Specifically, we use GMM to explore the stochastic Euler equation restrictions imposed on asset returns by optimal investment...

We explicitly link expected stock returns to firm characteristics such as firm size and book-to-market ratio in a dynamic general equilibrium production economy. Despite the fact that stock returns in the model are characterized by an intertemporal CAPM with the market portfolio as the only...

We construct a dynamic general equilibrium production economy to explicitly link expected stock returns to firm characteristics such as firm size and the book-to-market ratio. Stock returns in the model are completely characterized by a conditional CAPM. Size and book-to-market are correlated...

In this paper we argue that the main empirical findings about firm diversification and performance are actually consistent with a resource-based view of corporate diversification, where firms seek to maximize shareholder value. In our model, diversification is the natural result of firm growth...

Credit markets play an important role in the macroeconomy and credit market data is often used to predict future macroeconomic performance. In this paper we propose a tractable general equilibrium asset pricing model with heterogeneous firms that links movements in stock and bond markets to...

Credit markets play an important role in the macroeconomy and credit market data is often used to predict future macroeconomic performance. In this paper we propose a tractable general equilibrium asset pricing model with heterogeneous firms that links movements in stock and bond markets to...