The neoclassical theory of investment implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

Recent winners have temporarily higher loadings than recent losers on the growth rate of industrial production. The loading spread derives mostly from the positive loadings of winners. The growth rate of industrial production is a priced risk factor in standard asset pricing tests. In many...

We derive and test q-theory implications for cross-sectional stock returns. Under constant returns to scale, stock returns equal levered investment returns, which are tied directly to firm characteristics. When we use generalized method of moments to match average levered investment returns to...

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

We offer an investment-based explanation of momentum. The neoclassical theory of investment implies that expected stock returns are related to expected investment returns, defined as the next-period marginal benefits of investment divided by the current-period marginal costs of investment....

This paper presents evidence supporting the theory that problems of asymmetric information in debt markets affect financially unhealthy firms' ability to obtain outside finance and, consequently, their allocation of real investment expenditure over time. The author tests this hypothesis by...

The theoretical relationship between investment and uncertainty is ambiguous. This paper briefly surveys the insights that theory has to offer and then runs a series of simple tests aimed at evaluating the empirical significance of various theoretical effects. The authors' results from a panel...

The authors examine the neoclassical investment model using a panel of U.S. manufacturing firms. The standard model with no financing constraints cannot be rejected for firms with high (presample) dividend payouts. However, it is decisively rejected for firms with low (presample) payouts (firms...

This article isolates sources of misspecification in neoclassical investment Euler equations without ad hoc alterations of the basic model. First, allowing for nonlinear marginal investment adjustment costs improves model performance slightly. Some further improvement results from isolating...

type="main" <title type="main">ABSTRACT</title> <p>Contrary to recent accounts of off-balance-sheet securitization by financial firms, we show that asset securitization by nonfinancial firms provides a valuable form of financing for shareholders without harming debtholders. Using data from firms’ SEC filings, we find that...</p>