We put forward a general equilibrium model that links the cross-section variation of expected returns to firms’ life cycle dynamics. In the model all assets have the same exposure to short-run consumption risks, but di¤er in their exposure to long-run consumption risks (Bansal and Yaron...

We put forward an equilibrium model that links the cross-sectional variation in expected equity returns to firms' life cycle dynamics. The model features two sources of risks: short and long-run fluctuations in aggregate consumption, as in Bansal and Yaron (2004). Growth assets in the model are...

We propose a general equilibrium model to study the link between the cross section of expected returns and book-to-market characteristics. We model two primitive assets: value assets and growth assets that are options on assets in place. The cost of option exercise, which is endogenously...

We present a dynamic general equilibrium model with heterogeneous firms. Owners of firms delegate investment decisions to managers, whose consumption and investment decisions are private information. We solve the optimal contracts and characterize the implied general equilibrium. Our calibrated...

We present a dynamic general equilibrium model with heterogeneous firms. Owners of firms delegate investment decisions to managers, whose consumption and investment decisions are private information. We solve the optimal contracts and characterize the implied general equilibrium. Our calibrated...

We study the link between timing of cash flows and expected returns in general equilibrium production economies. Standard neoclassical RBC models produce an upward-sloping term structure of equity returns. Our economy incorporates heterogeneous exposure to aggregate productivity shocks across...

book-to-market sorted portfolios.

In this paper we develop an economic asset pricing framework that identifies three key sources of risk that underlie the risk and return tradeoff in the economy: news to cashflows, news to expected returns, and news to aggregate volatility. A novel contribution of this paper is the inclusion of...

In this paper, we investigate the design of optimal unemployment insurance in an environment with moral hazard and cyclical fluctuations. The optimal unemployment insurance contract balances the insurance motive to provide consumption for the unemployed with the provision of incentives to search...