Models of the q theory typically assume that investments are determined by a specific approximating structured q model, hence ruling out perturbations due to a set of statistically nearby unstructured alternatives. This paper formulates a generalized framework, where concern to unstructured q...

I examine how the robustness of investment opportunities influence firm payout policy and cash holdings. By exploiting new measures, the perturbations of q, a novel counterintuitive yet reasonable fact emerge: low robustness of investment opportunities (high perturbations of q) is able to spur...

I explore an intricate interaction between a firm’s risk exposure, intangible capital accumulation, and physical capital accumulation by using a unified dynamic investment model of capital allocation. The model emphasizes both the importance of the marginal value of the intangible capital and...

I propose a tractable model integrating dynamic internal capital allocation with imperfect patent protection, thereby endogenizing patent war as well as financing constraints. I emphasize the central importance of capital intangibility for corporate decisions when intangibles are insecure. The...

Conventional measurements of risk premiums are biased if the estimation models are potentially misspecified and unstable. Say, factor interactions is one of the crucial omitted specifications that standard models cannot involve. Motivated by this argument, we propose an interpretable...

With the dramatic progress of artificial intelligence algorithms in recent times, it is hoped that algorithms will soon supplant human decision-makers in various fields, such as contract design. We analyze the possible consequences by experimentally studying the behavior of algorithms powered by...

We propose a new modeling approach for the cross-section of returns. Our model, Factorization Asset Pricing Model (FAPM), allows for predictor interactions by introducing second-order observable characteristics interactions regarding the unobservable high-order loadings. If the characteristics...

This paper introduces the dual-contract design via Q-learning methods. In contrast to the standard principal-agent problem (a principal and an agent), we emphasize that the dual-contract problem can also be recognized as a dual-principal-agent problem (two principals and an agent). The method...