This paper studies the quantitative asset pricing implications of financial intermediary which faces an endogenous leverage constraint. I use a recursive method to construct the global solution that accounts for occasionally binding constraint. Quantitatively, the model generates a high and...

A common prediction of macroeconomic models of credit market frictions is that the tightness of financial constraints is countercyclical. As a result, theory implies a negative collateralizability premium; that is, capital that can be used as collateral to relax financial constraints provides...

Heterogeneity and evolutionary behaviour of investors are two of the most important characteristics of financial markets. This papers incorporates the adaptive behavior of agents with heterogeneous beliefs and establishes an evolutionary capital asset pricing model (ECAPM) within the...

We propose a new way to conduct multiple hypothesis testing in economics research. Our framework allows for correlation among tests and incomplete data, both of which are prevalent in economic meta-analysis. Our simulations show that that our method is able to produce the correct p-value cutoff...

Social interaction contributes to stochastic volatility and momentum in financial markets. By developing a simple evolutionary model of asset pricing and population game, we incorporate social interaction among investors with information uncertainty and show that social interaction leads to the...

Single factor asset pricing models face two major hurdles: the problematic time-series properties of the ex ante market risk premium and the inability of the risk measure to account for a substantial degree of the cross-sectional variation of expected excess returns. We provide an explanation...

If asset returns have systematic skewness, expected returns should include rewards for accepting this risk. We formalize this intuition with an asset pricing model which incorporates conditional skewness. Our results show that conditional skewness helps explain the cross-sectional variation of...

To capture the well documented time series momentum and reversal in asset price, we develop a continuous-time asset price model, derive the optimal investment strategy theoretically, and test the strategy empirically. We show that, by combining market fundamentals and timing opportunity with...

This paper demonstrates a novel risk premium channel for firms' dynamic lease versus buy decision. In a typical operating lease contract, a less financially constrained lessor (capital owner) effectively provides an insurance mechanism to a more constrained lessee (capital borrower) against the...

Theoretical models imply fund size and performance should be negatively linked. However, empiricists have failed to uncover consistent support for this negative relation. Using a new econometric framework which includes fund-specific sensitivities to decreasing returns to scale, we find a both...