As a consequence of optimal investment choices, firms' assets and growth options change in predictable ways. Using a dynamic model, we show that this imparts predictability to changes in a firm's systematic risk, and its expected return. Simulations show that the model simultaneously reproduces:...

We develop and analyze a model of a multi-stage investment project that captures many features of R\&D ventures and start-up companies. An important feature these problems share is that the firm learns about the potential profitability of the project t

An explicit expression for a firm's expected return is developed in a dynamic model of investment at the firm level. Each period, the firm has an option to invest. Past investment decisions account for the firm's existing asset base which is assumed

As a consequence of optimal investment choices, firms' assets and growth options change in predictable ways. Using a dynamic model, we show that this imparts predictability to changes in a firm's systematic risk, and its expected return. Simulations show that the model simultaneously reproduces:...

We derive a parsimonious rational model of active portfolio management that reproduces many regularities widely regarded as anomalous. Fund flows rationally respond to past performance in the model even though performance is not persistent and investments with active managers do not outperform...

As a consequence of optimal investment choices, firms' assets and growth options change in predictable ways. Using a dynamic model, we show that this imparts predictability to changes in a firm's systematic risk, and its expected return. Simulations show that the model simultaneously reproduces:...

We develop a dynamic model of investment at the firm level in order to better understand the behavior of equity returns. Each period the firm has an option to invest. Past investment decisions account for the firm's existing asset base, which is assumed to depreciate. The value of a firm is then...

As a consequence of optimal investment choices, firms' assets and growth options change in predictable ways. Using a dynamic model, we show that this imparts predictability to changes in a firm's systematic risk, and its expected return. Simulations show that the model simultaneously reproduces:...

We develop and analyze a model of a multi-stage investment project that captures many features of Ramp;D ventures and start-up companies. An important feature these problems share is that the firm learns about the potential profitability of the project throughout its life, but that...

We develop a simple rational model of active portfolio management that provides a natural benchmark against which to evaluate observed relationship between returns and fund flows. Many effects widely regarded as anomalous are consistent with this simple explanation. In the model, investments...