Matching asset price volatility in production economies is difficult. This paper shows that this difficulty can be summarized by three nested restrictions. First, matching asset price volatility requires volatile investment returns. Second, volatile investment returns require either large...

To examine whether theory helps predict the cross-section of returns, we combine text analysis of publications with out-of-sample tests. Based on the original texts, only 18% of predictors are attributed to risk-based theory. 59% are attributed to mispricing, and 23% have uncertain origins....