Traditional U.S. industries with higher firm-specific stock return and fundamentals performance heterogeneity use information technology (IT) more intensively and post faster productivity growth in the late 20th century. We argue that this mechanically reflects a wave of Schumpeter's creative...

The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices (driven by movements in the equity risk premium), while the cash flows of value stocks are particularly sensitive to permanent movements in aggregate stock prices (driven by market-wide...

The extreme levels of stock price volatility found during the Great Depression have often been attributed to political uncertainty. This paper performs an explicit test of the Merton/Schwert hypothesis that doubts about the survival of the capitalist system were partly responsible. It does so by...

The rationale for conservatively expensing R&D investments under U.S. GAAP largely relies on the uncertainty of the R&D-related future benefits. We examine the temporal dimension of uncertainty reflecting the time distance between R&D expenditures and the realization of future benefits. We...

Between the years 1934 and 1974, the Federal Reserve changed the initial margin requirement for the U.S. stock market 22 times. I use this variation to show that investors leverage constraints affect the pricing of risk. Consistent with the theoretical predictions of Frazzini and Pedersen...

This paper explains the size and value quot;anomaliesquot; in stock returns using an economically motivated two-beta model. We break the CAPMbeta of a stock with the market portfolio into two components, one reflecting news about the market's future cash flows and one reflecting news about the...

We examine extreme volatility events for 1987-99 in five Samp;P sub-aggregate indices: financial, industrial, mid-cap, transport, and utility. Identified event days are those for which the ratio of subsequent to prior return variance falls into the 1% critical range of a two-tailed F test. In...

I assemble an annual time series of bid-ask spreads on Dow Jones stocks from 1900-2000, along with an annual estimate of the weighted-average commission rate for trading NYSE stocks since 1925. Spreads are cyclical, especially during periods of market turmoil. The sum of half-spreads and one-way...

Modigliani and Cohn [1979] hypothesize that the stock market suffers from money illusion, discounting real cash flows at nominal discount rates. While previous research has focused on the pricing of the aggregate stock market relative to Treasury bills, the money-illusion hypothesis also has...

The objective of this paper is to examine the absolute and risk-adjusted effects on distribution rates and total wealth created by adding loss-limiting trend following strategies to buy and hold portfolios. Using 150 years of equity and bond data, we found that applying trend following to...