We propose a measure of corporate investment plans, namely, the expected investment growth (EIG). We document a robust finding that firms with high EIG have larger future investment growth and earn significantly higher returns than firms with low EIG, which cannot be fully explained by leading...

The Asset pricing literature has produced hundreds of risk factor candidates aimed at explaining the cross-section of expected excess returns, although risk factors which are in fact capable of providing independent information remains an open question. Appling a sparse model, Kozak, Nagel, and...

Assuming that risk premiums are determined by failure risk, we present a stylized model of interactions among risk-proxy variables, external financing, and stock returns in which a common mispricing factor, involving operating profit and external financing, drives the following five asset...

We decompose total disagreement about macro variables into the disagreement among optimists (i.e., forecasters whose forecast exceeds a certain threshold) and pessimists. Optimistic (pessimistic) forecasters tend to disagree more in good (bad) times. Pessimistic (optimistic) disagreement...

This study examines whether investors’ attitudes toward ambiguity can explain cross-sectional stock returns by investigating the relationship between future stock returns and option-implied volatilities as well as implied third moments. We find that investors’ attitudes toward different...

U.S. stocks' response to inflation surprises is, on average, robustly negative. Stocks' response to positive inflation surprises shows much more pronounced time-series variability than their response to negative inflation surprises. In our sample, stocks react significantly to positive inflation...

We examine the effect of ambiguity exposure on the cross-section of stock returns in the US equity market. In order to quantify ambiguity, we use a recently-developed methodology that measures ambiguity by perturbations in uncertain probabilities, and aversion to ambiguity by aversion to...

We develop an Artificial Stock Market - an agent-based simulation model of the stock market with many risky assets. The ASM has three layers of heterogeneous and interacting agents, and generates prices for 150 stocks. We present the current state of the model and demonstrate its ability to...

Industries that are more central in the network of intersectoral trade earn higher stock returns than industries that are less central. To explain this finding, I argue that stocks in more central industries have greater market risk because they have greater exposure to sectoral shocks that...