We develop a model of stock prices in which there are both differences of opinion among investors as well as short-sales constraints. The key insight that emerges is that breadth of ownership is a valuation indicator. When breadth is low i.e., when few investors have long positions in the stock...

This paper is an investigation into the determinants of asymmetries in stock returns. We develop a series of cross-sectional regression specifications which attempt to forecast skewness in the daily returns of individual stocks. Negative skewness is most pronounced in stocks that have...

A number of theories have been proposed to explain the medium-term momentum in stock returns identified by Jegadeesh and Titman (1993). We test one such theory--based on the gradual-information-diffusion model of Hong and Stein (1997)--and establish three key results. First, once one moves past...

We develop a model of pandemic risk management and firm valuation. We introduce aggregate transmission shocks into an epidemic model and link valuations to infections via an asset-pricing framework with vaccines. Infections lower earnings growth but firms can mitigate damages. We estimate a...

We provide the planner's solution to a model where households learn from exogenous natural disaster arrivals about arrival rates and spend to mitigate future damages. Mitigation cannot be decentralized due to positive externalities from curtailing aggregate risks. First-best can be implemented...

Value stocks have higher exposure to innovations in the nominal bond risk premium, which measures the markets' perception of cyclical variation in future output growth, than growth stocks. The ICAPM then predicts a value risk premium provided that good news about future output lowers the...

We identify a 'slope' factor in exchange rates. High interest rate currencies load more on this slope factor than low interest rate currencies. As a result, this factor can account for most of the cross-sectional variation in average excess returns between high and low interest rate currencies....

We set up an exponentially affine stochastic discount factor model for bond yields and stock returns in order to estimate the prices of aggregate risk. We use the estimated risk prices to compute the no-arbitrage price of a claim to aggregate consumption. The price-dividend ratio of this claim...

Our paper examines the impact of heterogeneous trading technologies for households on asset prices and the distribution of wealth. We distinguish between passive traders who hold fixed portfolios of stocks and bonds, and active traders who adjust their portfolios to changes in expected returns....

To explain the low-frequency variation in US equity and debt returns in the 20th century, we solve an equilibrium model in which households face housing collateral constraints. An increase in the ratio of housing to human wealth loosens these borrowing constraintsthus allowing for more risk...