We decompose the excess market return into speculation and non-speculation components. The former is negative and predicted by market sentiment. The latter is positive and not predicted by sentiment. The speculation component explains roughly 30% of the variation in the excess market return. In...

Momentum is a pervasive characteristic of financial markets that lacks a broadly accepted explanation. In addition to its longstanding challenge to asset pricing theory, recent work finds that momentum poses a challenge for expected utility (EU) theory, opening an avenue for new decision...

We study a representative agent that separates beliefs, ambiguity, and ambiguity attitude and nests benchmark models of expected utility preferences and ambiguity aversion. Within that framework, matching four market moments (the risk-free rate, equity premium, variance risk premium, and...

Recent studies have documented several trends in the U.S. market structure since the 1980s, such as the rise of large firms' markups and their profit margins. An important but not emphasized trend is the rise of the fixed operating costs of large firms. This trend is so salient that the...