This paper provides a dynamic rational expectations equilibrium model in which investors have heterogeneous information and investment opportunities. Informed investors privately receive advance information that is useful for predicting future earnings but is unrelated to current earnings. This...

This paper studies optimal consumption and portfolio choice in a Mertonstyle model with incomplete information when there is a distinction between ambiguity and risk. The latter distinction is afforded by adoption of recursive multiple-priors utility. The fundamental issues are: (i) How does the...

Entrepreneurs face significant non-diversifiable business risks. We build a dynamic incompletemarkets model of entrepreneurial firms to demonstrate the important implications of nondiversifiable risks for entrepreneurs’ interdependent consumption, portfolio allocation, financing, investment,...

In this paper we present a recursive method for the computation of dynamic competitive equilibria in models with heterogeneous agents and market frictions. This method is based on a convergent operator over an expanded set of state variables. The fixed point of this operator defines the set of...

In this paper, we develop a new censored quantile instrumental variable (CQIV) estimator and describe its properties and computation. The CQIV estimator handles censoring semi-parametrically in the tradition of Powell (1986), and it generalizes standard censored quantile regression (CQR) methods...

Empirical and experimental evidence documents that money illusion is persistent and widespread. This paper incorporates money illusion into two stochastic continuous-time monetary models of endogenous growth. Motivated by psychology, we model an agent's money illusion behavior by assuming that...

We develop a dynamic general equilibrium model to study the impact of the 2003 dividend and capital gains tax cuts. Firms are heterogeneous in productivity and make investment and financing decisions subject to capital adjustment costs, equity issuance costs, and collateral constraints. Our...

This paper studies the interaction between product market competition and takeover activity. We develop a dynamic model in which profit-maximizing production decisions of all firms in an industry as well as the timing and terms of a merger between two firms are jointly determined. We show that...

This paper presents an analytically tractable continuous-time general equilibrium model with investment irreversibility and fixed adjustment costs. In the model, there is a continuum of firms that are subject to idiosyncratic shocks to capital. Although the presence of investment frictions...

We present an analytically tractable general equilibrium business cycle model that features micro-level investment lumpiness. We prove an exact irrelevance proposition which provides sufficient conditions on preferences, technology, and the fixed cost distribution such that any positive upper...