We test whether the "representative agent" has intertemporally consistent expectations about time variation in the equity premium. First, we use option prices to estimate the expected future log equity premium (the forward rate) and compare this estimate to the log equity premium estimated in...

Standard theory implies that the discount rates used by firms in investment decisions play a key role in determining investment and in transmitting shocks to asset prices and interest rates to the real economy. However, there exists little evidence on how corporate discount rates change over...

We review the literature on the impact of the COVID-19 pandemic on financial markets. We first document several key facts about equity and fixed income markets during this period. We then discuss various literatures that analyze broad movements in prices, market dislocations, and the impact of...

Climate capitalists invest in green firms in order to lower these firms' cost of capital and thereby stimulate green investments. This "green investing" channel only works if green firms actually reduce their perceived cost of capital and discount rates in response to green investing. Using data...

We study how firms' perceived cost of capital is related to risk factors in financial markets. The analysis is based on hand-collected data from Gormsen and Huber (2022), which cover firms' perceived cost of capital and discount rates for more than 2,500 firms. Consistent with Modigliani-Miller,...

We conduct representative large-scale surveys of U.S. citizens aimed at measuring perceptions of large corporations' environmental, social, and governance performance and investigate how these perceptions affect the public support for economic policies. The public demands corporations to behave...

A large body of work has sought to measure the effect of interest rates on equity valuations. The challenge in doing so is that both are endogenous, and their comovement depends on the forces driving interest-rate changes. To address this problem, we develop and estimate a decomposition that...