Standard risk factors can be hedged with minimal reduction in average returns. Stocks with low factor-exposure have similar performance relative to stocks with high factor-exposure, hence a long-short portfolio hedges factor risk with little reduction in expected returns. This is true for both...

In this paper, I examine asset pricing in a multisector model with sectors connected through an input-output network. Changes in the network are sources of systematic risk reflected in equilibrium asset prices. Two characteristics of the network matter for asset prices: network concentration and...

We estimate the systemic effects of exit by a key over-the-counter (OTC) intermediary. In our model, risk-averse traders are connected by a core-periphery network. If traders are also averse to concentrated bilateral exposures then the incomplete network prevents full risk sharing. We quantify...

At low frequencies, we document that size and value premia exhibit strong positive co-movement, but are both negatively related to the equity premium. These patterns are explained in an investment-based asset pricing model featuring persistent micro and macro uncertainty. Micro uncertainty...

College admissions should also base their decisions on applicants' income as affirmative action targeting low-income applicants is a powerful policy to reduce intergenerational persistence of earnings and to improve both welfare and aggregate output. We construct an overlapping-generations model...

Firm volatilities co-move strongly over time, and their common factor is the dispersion of the economy-wide firm size distribution. In the cross section, smaller firms and firms with a more concentrated customer base display higher volatility. Network effects are essential to explaining the...

We show that firms' idiosyncratic volatility obeys a strong factor structure and that shocks to the common factor in idiosyncratic volatility (CIV) are priced. Stocks in the lowest CIV-beta quintile earn average returns 5.4% per year higher than those in the highest quintile. The CIV factor...