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Asset Pricing with Optimal Under-Diversification

Elenev, Vadim; Landvoigt, Tim - National Bureau of Economic Research - 2023

We study sources and implications of undiversified portfolios in a production-based asset pricing model with financial frictions. Households take concentrated positions in a single firm exposed to idiosyncratic shocks because managerial effort requires equity stakes, and because investors gain...

Persistent link: https://www.econbiz.de/10014250139

Stock-Based Compensation and CEO (Dis)Incentives

Benmelech, Efraim - 2008

Stock-based compensation is the standard solution to agency problems between shareholders and managers. In a dynamic … managers to work harder, it also induces them to hide any worsening of the firm's investment opportunities by following largely …-valued while managers hide the bad news to shareholders. We find that a firm-specific compensation package based on both stock and …

Persistent link: https://www.econbiz.de/10012464915

Sparse Modeling Under Grouped Heterogeneity with an Application to Asset Pricing

Cong, Lin William; Feng, Guanhao; He, Jingyu; Li, Junye - National Bureau of Economic Research - 2023

Sparse models, though long preferred and pursued by social scientists, can be ineffective or unstable relative to large models, for example, in economic predictions (Giannone et al., 2021). To achieve sparsity for economic interpretation while exploiting big data for superior empirical...

Persistent link: https://www.econbiz.de/10014322811

When Do Cross-Sectional Asset Pricing Factors Span the Stochastic Discount Factor?

Kozak, Serhiy; Nagel, Stefan - National Bureau of Economic Research - 2023

When expected returns are linear in asset characteristics, the stochastic discount factor (SDF) that prices individual stocks can be represented as a factor model with GLS cross-sectional regression slope factors. Factors constructed heuristically by aggregating individual stocks into...

Persistent link: https://www.econbiz.de/10014287376

RIM-Based Value Premium and Factor Pricing Using Value-Price Divergence

Cong, Lin William; George, Nathan Darden; Wang, Guojun - National Bureau of Economic Research - 2023

We document that value-to-price, the ratio of Residual-Income-Model-based valuation to market price, subsumes the power of book-to-market ratio and many other value or quality measures in predicting stock returns. Long-short value-to-price portfolios hedge against momentum, revitalize the...

Persistent link: https://www.econbiz.de/10014226164

Equity Prices, Market Power, and Optimal Corporate Tax Policy

González, Ignacio; Montecino, Juan A.; Stiglitz, Joseph E. - National Bureau of Economic Research - 2025

We study the optimal design of corporate tax policy in a textbook life-cycle model featuring two key deviations: (i) firms are imperfectly competitive and (ii) households save by purchasing equity shares in a stock market. In this simple environment, the financial wealth of savers is equal to...

Persistent link: https://www.econbiz.de/10015361419

Identifying Shocks to Systematic Risk in Times of Crisis

Boudoukh, Jacob; Liu, Yukun; Moskowitz, Tobias J.; … - National Bureau of Economic Research - 2024

We characterize how risk evolves during a crisis. Using high-frequency data, we find that the first two principal components (PCs) of the covariance matrix of global asset returns experience large, sudden, and temporary spikes coinciding with well-known crises - Covid-19 pandemic, Global...

Persistent link: https://www.econbiz.de/10014635656

Long-Run Risks and Financial Markets

Bansal, Ravi - 2007

The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price...

Persistent link: https://www.econbiz.de/10012465457

Risk, Uncertainty and Asset Prices

Bekaert, Geert - 2006

We identify the relative importance of changes in the conditional variance of fundamentals (which we call "uncertainty") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices and risk premiums. Theoretically, we introduce persistent...

Persistent link: https://www.econbiz.de/10012466420

Anomalies

Zhang, Lu - 2005

I construct a neoclassical, Q-theoretical foundation for time-varying expected returns in connection with corporate policies and events. Under certain conditions, stock return equals investment return, which is directly tied with firm characteristics. This single equation is shown analytically...

Persistent link: https://www.econbiz.de/10012467361