We investigate both theoretically and empirically how unemployment level and its growth affect future stock returns. We … find that both a higher unemployment rate and higher growth of unemployment positively predict future stock market returns … reinforce each other making stock returns exceptionally high in periods of high unemployment and high unemployment growth. Our …

Standard theory implies that the discount rates used by firms in investment decisions play a key role in determining … theory. Moreover, the large and growing discount rate wedges can account for low investment (relative to high asset prices …

Standard theory implies that the discount rates used by firms in investment decisions (i.e., their required returns to … below the one- to-one mapping assumed by standard theory, with substantial heterogeneity across firms. This pattern leads to …