We provide a unified explanation for several apparent anomalies in the cross-section of asset returns, namely the failure of the CAPM to account for the cross-sectional relation between average stock returns and firm valuation ratios, past investment, profitability, market beta, or idiosyncratic volatility. Using a calibrated structural model, we argue that these characteristics are imperfect p...

This paper investigates the performance of efficient portfolios in a financial market with heterogeneous investors including rational traders, noise traders, and chartists. A generalization of the security market line result states that, regardless of the diversity of beliefs, the portfolios of rational investors with mean-variance preferences are mean-variance efficient in the sense of classic...

We find that shocks to the equity capital ratio of financial intermediaries—Primary Dealer counterparties of the New York Federal Reserve—possess significant explanatory power for crosssectional variation in expected returns. This is true not only for commonly studied equity and government bond market portfolios, but also for other more sophisticated asset classes such as corporate and sovereig...

During recession, many macroeconomic variables display higher levels of volatility. We show how introducing an AR(1)-ARCH(1) driving process into the canonical Lucas consumption CAPM framework can account for the empirically observed greater volatilty of asset returns during recessions. In particular, agents' joint forecasting of levels and time-varying second moments transforms symmetric-volat...

This paper analyses the general equilibrium effects on asset valuation and capital accumulation of an exogenous drop in the rate of return required by investors in a model of production with imperfectly competitive product markets. The model improves substantially on the standard perfectly competitive neo-classical framework, by dissociating the behavior of marginal and average q. It tracks mor...

Spatial dependency has been broadly studied in several research areas, such as environmental criminology, economic geography, environmental sciences, and urban economics. However, it has been essentially overlooked in other subfields of economics and in the field of finance as a whole. A key element at stake is the definition of contiguity. In the context of financial markets, defining a metric...

This paper examines how stock prices are affected by research and development activities for Danish firms for the period, 1989 to 2002. Both through analysis of portfolios and regression analysis, the role of R&D assets is considered along with a number of other fundamental factors, such as size, the book to market ratio, leverage and the CAPM beta. There is at best a weak indication that R&D i...

This paper considers an asset model that generates a monetary equilibrium in which capital, government bonds, and fiat money are held as perfect substitutes. Due to a congestion effect, output per producer is a decreasing function of the aggregate capital stock, and this effect makes a legal restriction on capital accumulation welfare enhancing. The restriction considered is that the money to c...

In modern economics, Intellectual capital is described as an intangible asset which can be used as a source of sustainable competitive advantage. However, intellectual capital components have to interact in themselves to create value. The paper seeks to examine the impact of intellectual capital on firms’ market value and financial performance. The efficiency of the value added by corporate int...