We study a quantitative DSGE model linking a state of the art asset pricing framework à la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constrained leads to an increase in risk...

We study a quantitative DSGE model linking a state of the art asset pricing framework à la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constrained leads to an increase in risk...

Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...

I build a dynamic capital structure model that demonstrates how business-cycle variations in expected growth rates, economic uncertainty, and risk premia influence firms' financing and default policies. Countercyclical fluctuations in risk prices, default probabilities, and default losses arise...

A number of theoretical studies predict an unconditional negative association between firm risk premium and firm disclosure, where additional disclosure reduces estimation risk or information asymmetry. Empirical studies based on these models frequently report mixed results. Dutta and Nezlobin...

We propose a novel measure of investment plans, namely, expected investment growth (EIG) and find stocks with high EIG outperform stocks with low EIG by 17% per annum. This premium can be generated in a neoclassical model with the investment plan friction, in which a firm's expected returns...

This paper proposes a time series decomposition of book-to-market ratio (BM) into a trend component and an innovation component (I_BM). Under the framework of stock valuation with growth options, we demonstrate that I_BM is negatively related to the change of growth options and therefore...

Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...

To understand macroeconomic risks underlying currency carry trades, I propose exploiting rich source of information from analysts’ economic growth forecasts. Specifically, I obtain measures of global growth prospects from the cross-analyst distribution of real GDP growth forecasts. I find that...