Ho, Tuan Quoc; Kim, Kirak; Li, Yang; Xu, Fangming - 2023
We study a novel mechanism through which real options play a prominent role in inducing the skewness of stock returns …. Building on the investment-based asset pricing framework, we show that firms’ real options to contract (expand) their …-shaped function of firm productivity. Furthermore, the real-options effect is stronger for more flexible firms, characterized by lower …