Within a broad sample of US manufacturing firms, we find that, controlling for investment opportunities and financial constraints, increased governance quality is associated with higher levels of investment. Increased governance quality is also associated with greater responsiveness of...

The output gap, a production based macroeconomic variable, is a strong predictor of stock and bond returns. It is a prime business cycle indicator that does not include the level of market prices, thus removing any suspicion that returns are forecastable due to a fad in prices being washed away....

The output gap, a production based macroeconomic variable, is a strong predictor of US stock returns. It is a prime business cycle indicator that does not include the level of market prices, thus removing any suspicion that returns are forecastable due to a quot;fadquot; in prices being washed...

We uncover a positive relationship between firms' corporate governance quality, as measured by the degree of managerial entrenchment, and the quality of their real investment decisions. Firms whose managers are less entrenched invest more, invest more in line with their investment opportunities...

The spread in average returns between low and high asset growth and investment portfolios is largely accounted for by their spread in systematic risk, as measured by the Chen, Roll and Ross (1986) factors. In addition, systematic risk and volatility fall sharply during large investment periods....

We study the predictability of stock returns using a pure macroeconomic measure of the world business cycle, namely the world's capital to output ratio. This variable tracks variation in expected stock returns in a group of the major industrial economies in the presence of world financial...

We ask to what extent the negative relation between investment and average stock returns is driven by risk. We show that: (i) the average return spread between low and high asset growth and investment portfolios is largely accounted for by their spread in systematic risk, as measured by the...

We conduct an empirical investigation of an emerging strand of models, pioneered by Berk, Green and Naik (1999), relating firms' real investment behavior under investment irreversibility and asset return dynamics. The models in this literature share many of the same predictions. We first extend...