Tobin's Q exceeds one, even without any adjustment costs, for a firm that earns rents as a result of monopoly power or of decreasing returns to scale in production. Even when there are no adjustment costs and marginal Q is always equal to one, Tobin's Q is informative about the firm's growth...

Empirical evidence suggests that capital separation is an important phenomenon over and beyond depreciation and that reallocation is a costly and time-consuming process. In addition, both separation and reallocation rates display substantial variation over the business cycle. We build a dynamic...

A number of studies show that entrepreneurial households face a large amount of unvidersifiable risk. This paper studies the effects of this risk on the relationship between uncertainty, innovation and investment dynamics. In the first part of the paper we develop a simple model of a risk averse...

Building on recent developments in behavioral asset pricing, we develop a model in which an increase in the dispersion of investor beliefs under short-selling constraints predicts a rise in stock price above its fundamental value, or bubble. The model predicts managers respond to bubbles by...