New empirical facts show that equity term premium is counter-cyclical, while the term structure of equity yield is pro-cyclical and switches sign between expansions and recessions. We decompose the term structure of equity yield into an equity term premium and a mean reversion component about...

In this paper, we argue that leasing is an important alternative way of capital reallocation. We propose a broader measure of capital reallocation, which not only includes asset purchase and sale, but also considers lease. Empirically, we show that the lease-induced reallocation component is...

This paper extends the analysis of the seminal work of Brock and Hommes (1997, 1998) on heterogeneous beliefs and rational routes to randomness in discrete-time models to a continuous-time model of asset pricing. The resulting model characterised mathematically by a system of stochastic delay...

We introduce a heterogeneous agent asset pricing model in continuous-time to show that, although trend chasing, switching and herding all contribute to market volatility in price and return and to volatility clustering, their impacts are different. The fluctuations of the market price and return...

We propose a continuous-time heterogeneous agent model consisting of fundamental, momentum, and contrarian traders to explain the significant time series momentum. We show that the performance of momentum strategy is determined by both time horizon and the market dominance of momentum traders....

A common prediction of macroeconomic models of credit market frictions is that the tightness of financial constraints is countercyclical. As a result, theory implies a negative collateralizability premium; that is, capital that can be used as collateral to relax financial constraints provides...

This paper studies how the durability of assets affects the cross-section of stock returns. More durable assets incur lowers frictionless user costs but are more "expensive", in the sense that they need more down payments making them hard to finance. In recessions, firms become more financially...

We study asset pricing implications of return extrapolation in a Lucas economy. We find that the effect of extrapolation is mainly on short rates rather than risk premia, time variation in expected returns is mainly driven by time-varying short rates, and return volatility can be lower than...

In an investment-based asset pricing model, we build a collective-learning framework in which decision-makers learn a target firm's exposure to systematic risk from its peers' observations. This learning mechanism endogenously creates a time-variation in the discount rate that significantly...

This paper argues leasing is a risk-sharing mechanism: risk-tolerant lessors (capital owners) provide insurance to financially constrained risk-averse lessees (capital borrowers) against systematic capital price fluctuations. We provide strong empirical evidence to support this novel risk...