We study a quantitative DSGE model linking a state of the art asset pricing framework à la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constrained leads to an increase in risk...

This paper addresses the link between shocks to productivity trend growth and long-run consumption risk in a production economy model with recursive utility. Quantifying trend growth shocks, I find that persistent fluctuations in trend growth are the key driver of sizable long-run consumption...

I propose a Capital Asset Pricing Model in which investor demand exhibits a speculative component. In equilibrium, investors' optimal trade-off between diversification and speculation generates predictable patterns for stocks with extreme book-to-market ratios. Consistent with the model...

We propose a measure of corporate investment plans, namely, the expected investment growth (EIG). We document a robust finding that firms with high EIG have larger future investment growth and earn significantly higher returns than firms with low EIG, which cannot be fully explained by leading...

We introduce a straightforward method to estimate the implied cost of equity, allowing growth horizons to fluctuate both cross-sectionally and through time. Our results show substantial dispersion of implied growth horizons in cross-sections and time-series for US firms in the years 1988-2013....

We find that the low average returns to firms with high asset growth are consistent with two key implications of models of diagnostic investor expectations (e.g., Bordalo, Gennaioli, La Porta, and Shleifer, 2019) that formalize the representativeness heuristic of Kahneman and Tversky (1972)....

Purpose: The purpose of the study is to examine the dynamics in the troika of asset pricing, volatility, and the business cycle in the US and Japan.Design/methodology/approach: The study uses a six-factor asset pricing model to derive the realized volatility measure for the GARCH-type...

Prior research finds expected returns decrease in firm-level total asset growth. This study shows that external growth, measured as asset growth raised from capital markets, has stronger power than total asset growth predicting the cross section of average returns. External growth subsumes the...