We develop an endogenous growth model with heterogeneous firms facing financial frictions, where misallocation emerges explicitly as a crucial endogenous state variable and plays a significant role in driving economic growth through the valuation channel. The model illustrates that transient...

We generalize the Black–Litterman (BL) portfolio management framework to incorporate time-variation in the conditional distribution of returns in the asset allocation process. We evaluate the performance of the dynamic BL model using both standard performance ratios as well as other measures...