The decade prior to the Great Recession saw a boom in global trade and rising transportation costs. High-yielding commodity exporters' currencies appreciated, boosting carry trade profits. The Global Recession sharply reversed these trends. We interpret these facts with a two-country general...

We develop an equilibrium model where cash holdings, costly refinancing policies, and managerial incentives are jointly determined to quantify the market's influence on management's ex ante behavior. We also derive a general formula that shows how agency and financing distortions shape payouts...

We empirically show across several broad asset classes that sectoral wealth shares do not positively correlate with their risk premia---a first-order prediction of canonical equilibrium models. We then analyze the roles mean-variance and hedging demand play in accounting for sectoral shifts...

I argue that intangible assets promote agency conflicts between outside investors and inside specialists. Their opacity and specialized nature provide a microfoundation for why highly intangible firms underinvest despite great valuations and profitability---a challenge for standard theories....

We construct an asset pricing model with explicit default to develop a risk-based source of the distress anomaly. We show that distress produces sharply countercyclical betas leading to biased estimates of risk premia and alphas. This effect is amplified when earnings growth is mean-reverting,...

Persistent interest rate differentials account for much of the currency carry trade profitability. "Commodity currencies" offer high interest rates on average, while countries that export finished goods tend to have low interest rates. We develop a general equilibrium model of international...

Exchange rate volatility falls after a trade deal, driven by a decline in the systematic component of risk. The average trade deal increases trade by 50 percent over five years, reducing systematic risk by a third of a standard deviation across countries. We examine this connection in an...

Persistent differences in interest rates across countries account for much of the profitability of currency carry trade strategies. "Commodity currencies'' tend to have high interest rates while low interest rate currencies belong to exporters of finished goods. This pattern arises in a...