We develop a two sector general equilibrium model with capital accumulation and convex adjustment costs. We use the model to study capital asset pricing and reallocation, as well as optimal consumption and investment decisions. With two sectors, the consumer balances diversification against the...

We develop a dynamic portfolio-choice model with illiquid alternative assets to analyze conditions under which the “Endowment Model,” used by some large institutional investors such as university endowments, does or does not work. The alternative asset has a lock-up, but can be voluntarily...

We analyze a dynamic model of optimal capital structure and liquidity management when firms face external financing frictions. Besides the classical tradeoff between the tax advantages of debt and bankruptcy costs, an important new cost of debt financing in this context is an endogenous debt...

Asset managers face increasing pressure to only hold firms that meet net-zero carbon emissions targets. We model how these mandates incentivize firms to address the global-warming externality through investments in decarbonization capital. A firm that invests receives a lower cost of capital by...

We develop a model of investment under uncertainty for a nancially constrained firm. Facing external financing costs, the firm prefers to fund its investment through internal funds, so that the firm's optimal investment policy and value now depend on both its earnings fundamentals and liquidity...

An investor receives utility bursts from realizing gains and losses at the individual-stock level (Barberis and Xiong, 2009, 2012; Ingersoll and Jin, 2013) and dynamically allocates his mental budget between risky and risk-free assets at the trading-account level. Using savings, he reduces his...

We develop a tractable continuous-time consumption-savings model for a liquidity-constrained agent who faces both permanent and transitory income shocks under incomplete markets. We derive an explicitly-solved consumption function and show that the marginal (certainty equivalent) value of...