We develop a dynamic equilibrium model to derive the endogenous relations among firms' ownership structures, managerial incentives and asset returns. Ownership concentration is positively related to managerial incentives (PPS), but is negatively related to its expected stock (dollar) return and...

My dissertation concerns the equilibrium asset pricing and its implications when agents are heterogenous. There are three chapters in the dissertation. In chapter one, I study the asset pricing implications of default in an equilibrium model with incomplete markets. Defaultable debt is not...

We examine the properties of equilibrium stock returns in an incomplete information economy in which agents need to learn the hidden state of the endowment process. Both Bayesian and suboptimal learning rules are considered, including near-rational learning, conservatism, representativeness,...

One finding of recent empirical studies is that financially distressed stocks have large dispersion in their book to market value of equity (BM) ratios. In this paper we provide an explanation based entirely on rational decision making by investors. Our main argument is that the likelihood of a...