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An Equilibrium Asset Pricing Model with Labor Market Search

Kuehn, Lars-Alexander; Petrosky-Nadeau, Nicolas; Zhang, Lu - Charles A. Dice Center for Research in Financial … - 2011

Search frictions in the labor market help explain the equity premium in the financial market. We embed the Diamond-Mortensen-Pissarides search framework into a dynamic stochastic general equilibrium model with recursive preferences. The model produces a sizeable equity premium of 4.54% per annum...

Persistent link: https://www.econbiz.de/10009416926

An equilibrium asset pricing model with labor market search

Kuehn, Lars-Alexander; Petrosky-Nadeau, Nicolas; Zhang, Lu - 2012

"Search frictions in the labor market help explain the equity premium in the financial market. We embed the Diamond-Mortensen-Pissarides search framework into a dynamic stochastic general equilibrium model with recursive preferences. The model produces a sizeable equity premium of 4.54% per...

Persistent link: https://www.econbiz.de/10009507047

Endogenous Disasters

Petrosky-Nadeau, Nicolas; Zhang, Lu; Kuehn, Lars-Alexander - 2018

Market economies are intrinsically unstable. The standard search model of equilibrium unemployment, once solved accurately with a globally nonlinear algorithm, gives rise endogenously to rare disasters. Intuitively, in the presence of cumulatively large negative shocks, inertial wages remain...

Persistent link: https://www.econbiz.de/10014117194

A Model of Momentum

Liu, Laura Xiaolei - 2011

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

Persistent link: https://www.econbiz.de/10013132883

Does Q-Theory with Investment Frictions Explain Anomalies in the Cross-Section of Returns?

Li, Dongmei - 2011

Q-theory predicts that investment frictions steepen the relation between expected returns and firm investment. Using … constrained firms. There is no evidence that q-theory with investment frictions explains the investment growth, net stock issues …, abnormal corporate investment, or net operating assets anomalies. Limits-to-arbitrage proxies dominate q-theory with investment …

Persistent link: https://www.econbiz.de/10013133882

Covariances, Characteristics, and General Equilibrium : A Critique

Lin, Xiaoji - 2012

We question a deep-ingrained doctrine in asset pricing: if an empirical characteristic-return relation is consistent with investor “rationality,” the relation must be “explained” by a risk factor model. The investment approach changes the big picture of asset pricing. Factors formed on...

Persistent link: https://www.econbiz.de/10013114398

A Model of Momentum

Liu, Laura Xiaolei - 2012

We offer an investment-based interpretation of price and earnings momentum. The neoclassical theory of investment …

Persistent link: https://www.econbiz.de/10013115136

Anomalies

Li, Erica X. N. - 2010

We take a simple q-theory model and ask how well it can explain external financing anomalies, both qualitatively and …

Persistent link: https://www.econbiz.de/10013149934

An Alternative Three-Factor Model

Chen, Long - 2014

A new factor model consisting of the market factor, an investment factor, and a return-on-equity factor is a good start to understanding the cross-section of expected stock returns. Firms will invest a lot when their profitability is high and the cost of capital is low. As such, controlling for...

Persistent link: https://www.econbiz.de/10013071089

The Stock Market and Aggregate Employment

Chen, Long - 2009

We study the interactions between the stock market and the labor market. When aggregate risk premiums are time-varying, predictive variables for market excess returns should forecast long-horizon growth in the marginal benefit of hiring and thereby long-horizon aggregate employment growth....

Persistent link: https://www.econbiz.de/10013158097