This chapter is concerned with the classical applied problem of capital allocation by a corporation whose securities are traded in competitive and frictionless markets. Under reasonable assumptions that are discussed, this amounts to choosing projects whose market value exceeds their cost, so...

In this paper we provide new evidence on the predictability of aggregate stock market returns, and new time series of the expected excess returns on common stocks. We extract aggregate discount rate news from equity portfolio returns and use this information to construct estimates of expected...