I show that a firm's capital intensity affects the asset pricing implications of investment-specific technology shocks measured by a popular measure, the IMC porfolio. Capital-intensive stocks sorted by the exposure to this measure generate a highly significant average return premium of up to 5%...

When a corporation issues debt with a fixed nominal coupon, the real value of future payments decreases with the price level. Forward-looking corporate default decisions therefore depend on monetary policy through its impact on expected inflation. We build a general equilibrium economy with...