Large crises tend to follow rapid credit expansions. Causality, however, is far from obvious. We show how this pattern arises naturally when financial intermediaries optimally exploit economic rents that drive their franchise value. As this franchise value fluctuates over the business cycle, so...

We construct accounting-based costs of equity for dollar neutral long-short trading strategies formed on a comprehensive list of anomaly variables. These variables include book-to-market, size, composite issuance, net stock issues, abnormal investment, asset growth, investment-to-assets,...

Previous work shows that the growth rate of industrial production is a common macroeconomic risk factor in the cross-section of expected returns. We demonstrate the connection between momentum profits and shifts in factor loadings on this macroeconomic variable. Winners have temporarily higher...

The investment CAPM, in which expected returns vary cross-sectionally with investment, profitability, and expected growth, provides an equilibrium foundation for Graham and Dodd (1934). The q5 model is a good start to explaining prominent security analysis strategies, such as Abarbanell and...