An accurate global projection algorithm is critical for quantifying the basic moments of the Diamond-Mortensen-Pissarides (DMP) model. Loglinearization understates the mean and volatility of unemployment, but overstates the volatility of labor market tightness and the magnitude of the...

Market economies are intrinsically unstable. The standard search model of equilibrium unemployment, once solved accurately with a globally nonlinear algorithm, gives rise endogenously to rare disasters. Intuitively, in the presence of cumulatively large negative shocks, inertial wages remain...

Search frictions in the labor market help explain the equity premium in the financial market. We embed the Diamond-Mortensen-Pissarides search framework into a dynamic stochastic general equilibrium model with recursive preferences. The model produces a sizeable equity premium of 4.54% per annum...

An accurate global algorithm is critical for quantifying the dynamics of the Diamond-Mortensen-Pissarides model. Loglinearization understates the mean and volatility of unemployment, overstates the unemployment-vacancy correlation, and ignores impulse responses that are an order of magnitude...

A search and matching model, when calibrated to the mean and volatility of unemployment in the postwar sample, can potentially explain the large unemployment dynamics in the Great Depression. The limited response of wages to labor market conditions from credible bargaining and the congestion...

An accurate global algorithm is crucial for quantifying the dynamics of the Diamond-Mortensen-Pissarides model. Loglinearization understates the mean and volatility of unemployment, overstates the unemployment-vacancy correlation, and ignores impulse responses that are an order of magnitude...

The q-factor model shows strong explanatory power and largely summarizes the cross section of average stock returns. In particular, the q-factor model fully subsumes the Fama-French (2018) 6-factor model in head-to-head factor spanning tests. The q-factor model is an empirical implementation of...

I construct a neoclassical, Q-theoretical foundation for time-varying expected returns in connection with corporate policies and events. Under certain conditions, stock return equals investment return, which is directly tied with firm characteristics. This single equation is shown analytically...

A new class of Capital Asset Pricing Models (CAPM) arises from the first principle of real investment for individual firms. Conceptually as "causal"' as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a leading asset pricing paradigm. Firms do a good job in...