I study the interaction between lumpy investment and asset prices in both time-series and cross-section. To this end, I work with a variant of habit sensitivity function introduced in Campbell & Cochrane (1999). The model produces 100\% equity volatility of data by generating volatile marginal...

I incorporate the productivity risks into an investment-based q-factor asset pricing model. The productivity risks factors largely summarize the cross-sectional portfolio return, where the time-varying volatility plays an important role. A parsimonious q-factor model driven by productivity risks...