The Great Recession of 2008 offers a primary example of the important role that fluctuations in credit risk play in the aggregate economy. In this paper we explore this link with a tractable general equilibrium asset pricing model with heterogeneous firms. Our model produces realistic movements...

The demand for durable goods is more cyclical than that for nondurable goods and services. Consequently, the cash flow and stock returns of durable-good producers are exposed to higher systematic risk. Using the NIPA input-output tables, we construct portfolios of durable-good, nondurable-good,...

"The demand for durable goods is more cyclical than that for nondurable goods and services. Consequently, the cash flow and stock returns of durable-good producers are exposed to higher systematic risk. Using the NIPA input-output tables, we construct portfolios of durable-good, nondurable-good,...

This paper jointly examines the link between competition and expected returns in the time series and in the cross section. To this end, we build a general equilibrium model where markups vary because of firm entry with oligopolistic competition. When concentration is high, markups are more...

We develop a theory linking “misallocation,” i.e., dispersion in static marginal products of capital (MPK), to systematic investment risks. In our setup, firms differ in their exposure to these risks, which we show leads naturally to heterogeneity in firm-level risk premia and, more...

How much safety and liquidity can the US government provide? Should it accommodate demand for these attributes because high convenience yields in Treasuries lower its cost of borrowing? We evaluate a novel fiscal risk channel limiting the government's capacity to provide such services. Rising...