In this paper I ask whether a model of ¯rm capital accumulation with entry and exit calibrated to match the investment …

We analyze firms’ investment behavior, differentiating firms according to the cash flow levels they experience during … positive cash flow show higher investment-cash flow sensitivity than firms with persistent negative cash flow. Independent of …

-factor model is an empirical implementation of the investment CAPM. The basic philosophy is to price risky assets from the … perspective of their suppliers (firms), as opposed to their buyers (investors). As a disruptive innovation, the investment CAPM …

quantitatively. Our central insight is that optimal investment is an important driving force of these anomalies. The model … simultaneously reproduces procyclical equity issuance waves, the negative relation between investment and average returns, long …

investment. Leverage targets conservatively embed the option to issue transitory debt, with the evolution of leverage reflecting … the sequence of investment outlays. We estimate a dynamic capital structure model with these features and find that it … the leverage changes accompanying investment quot;spikes.quot; It generates leverage ratios with slow average speeds of …

-space marginal q requires only general restrictions on the stochastic discount factor and the firm investment technology, and it uses … simple linear estimation methods. Consistently with a large class of neoclassical investment models, I construct the state …-space marginal q using the firm capital stock and profitability shocks. I show that this new measure of real investment opportunities …

, stock returns equal levered investment returns that are tied directly with characteristics. This equation generates the … relations of average returns with book-to-market, investment, and earnings surprises. We estimate the model by minimizing the … differences between average stock returns and average levered investment returns via GMM. Our model captures well the average …

The q-theory implies that investment is a first-order determinant of the cross section of expected returns, and that … optimal investment drives the external financing anomalies. Our neoclassical model simultaneously and in many cases … relation between investment and average returns; long-term underperformance following equity issuance; the mean …

A detailed treatment of aggregation and capital heterogeneity substantially improves the performance of the investment … capital. The model fits well the value, momentum, investment, and profitability premiums simultaneously and partially explains … premiums, as well as the countercyclical and long-term dynamics of the value and investment premiums. However, the model falls …

with investor “rationality,” the relation must be “explained” by a risk factor model. The investment approach changes the …-based factor models can be linear approximations of firm-level investment returns. The evidence that characteristics dominate … important, the investment approach completes the consumption approach in general equilibrium, especially for cross …