My dissertation aims at understanding the economic force behind the success of long-run consumption-based asset pricing models, it consists of three chapters. It also provides us a new approach to test consumption-based asset pricing models. Chapter one provides a brief summary of the...

In the first chapter I investigate whether firms' physical investments react to the speculative over-pricing of their securities. I introduce investment considerations in an infinite horizon continuous time model with short sale constraints and heterogeneous beliefs along the lines of Scheinkman...