This study revisits the relation between firms' choices of debt maturity and their investment in a dynamic world. Prior research, including Myers (1977), suggests that financing with short-term debt resolves the underinvestment problem caused by debt financing. In contrast, I establish that...

In this study we examine the long term behavior of stock returns. The analysis reveals that negative autocorrelations of the returns exist for a super-long horizon as long as 10 years. This pattern, however, contrasts to predictions of previous stock price models which include random walks. We...

In an asset-pricing model calibrated to match the standard asset pricing empirical properties -- in particular, the time-variation in the equity premium -- we calculate the value implications of sub-optimal capital budgeting decisions. Specifically, we calculate that an investment policy that...

In an investment-based asset pricing model, we build a collective-learning framework in which decision-makers learn a target firm's exposure to systematic risk from its peers' observations. This learning mechanism endogenously creates a time-variation in the discount rate that significantly...