We derive and test q-theory implications for cross-sectional stock returns. Under constant returns to scale, stock returns equal levered investment returns, which are tied directly to firm characteristics. When we use GMM to match average levered investment returns to average observed stock...

Substantial attention has been paid in recent years to the risk of maturity mismatch in emerging markets. Although this risk is micro economic in nature, the evidence advanced thus far has taken the form of macro correlations. We evaluate this mechanism empirically at the micro level by using a...

Using asset prices I estimate the marginal value of capital in a dynamic stochastic economy under general assumptions about technology and preferences. The state-space measure of marginal q relies on the joint measurability of the value function, i.e. firm market value, and its underlying firm...

We investigate how idiosyncratic lender shocks impact corporate investment. Lenders with recent default experience write stricter loan contracts, leading to a reduction in real investment for borrowing firms. The decline in investment is not attributable to loan riskiness, borrower's agency...

This paper aims to determine factors causing the stagnation of Korean firms' fixed investment after the global financial crisis, using panel data for the period of 1999-2016. Fixed investment remained sensitive to cash flow and Tobin's q although their effects decreased after the global...

The neoclassical q-theory is a good start to understand the cross section of returns. Under constant return to scale, stock returns equal levered investment returns that are tied directly with characteristics. This equation generates the relations of average returns with book-to-market,...

We use a fully-specified neoclassical model augmented with costly external equity as a laboratory to study the relations between stock returns and equity financing decisions. Simulations show that the model can simultaneously and in many cases quantitatively reproduce: procyclical equity issuance;...

The q-theory implies that investment is a first-order determinant of the cross section of expected returns, and that optimal investment drives the external financing anomalies. Our neoclassical model simultaneously and in many cases quantitatively reproduces: Procyclical equity issuance waves;...

We develop a theoretical model in which disagreement between management and shareholders creates a link between investment and the stock market. We show that the stock price decreases in the level of disagreement. Because management uses the stock price to infer the level of disagreement, the...

We investigate implications for the cost of capital in a model with agency conflicts between inside and outside shareholders, where the severity of agency costs depends on a parameter representing investor protection. Using firm-level data for Italy and Germany we find significant differences in...