We study asset-pricing implications of innovation in a general-equilibrium overlapping- generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of...

We study asset-pricing implications of innovation in a general-equilibrium overlapping-generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of...

The hypothesis that financial markets punish traders who make relatively inaccurate forecasts and eventually eliminate the effect of their beliefs on prices is of fundamental importance to the standard modeling paradigm in asset pricing. We establish necessary and sufficient conditions for...

We construct occupation-specific indicators of technological change that span two centuries (1850-2010) using textual analysis of patent documents and occupation task descriptions. For each patent, we identify the set of occupations it is most closely related to based on the similarity of the...

Active mutual fund managers care about fund size, which is affected by common fund flows driven by macroeconomic shocks. Fund managers hedge against common flow shocks by tilting their portfolios toward low-flow-beta stocks. In equilibrium, common flow shocks earn a risk premium. A multi-factor...

The performance of a given portfolio policy can in principle be evaluated by comparing its expected utility with that of the optimal policy. Unfortunately, the optimal policy is usually not computable in which case a direct comparison is impossible. In this paper we solve this problem by using...

Milton Friedman argued that irrational traders will consistently lose money, won't survive and, therefore, cannot influence long run asset prices. Since his work, survival and price impact have been assumed to be the same. In this paper, we demonstrate that survival and price impact are two...

We explicitly link expected stock returns to firm characteristics such as firm size and book-to-market ratio in a dynamic general equilibrium production economy. Despite the fact that stock returns in the model are characterized by an intertemporal CAPM with the market portfolio as the only...

American option pricing problem is one of the most computationally intensive problems in derivative pricing theory. The complications arise from the fact that the holder of the option has the right to exercise it at any one of the pre-specified exercise dates. Hence, to price such an option, one...

We analyze a general equilibrium exchange economy with a continuum of agents who have quot;catching up with the Jonesesquot; preferences and differ only with respect to the curvature of their utility functions. While individual risk aversion does not change over time, dynamic redistribution of...