I derive a production-based asset pricing formula to infer aggregate stock market returns from macroeconomic time series when the technology is putty-clay. Capital heterogeneity leads to variation in the aggregate stock market value through a new compositional e¤ect. The asset pricing formula, which holds regardless of the stochastic discount factor, predicts that the stock market value is high...

Contrary to the predictions of standard economic theory, capital market liberalization has been a mixed blessing for many countries. Liberalization of debt inflows exposes economies to the risk of crises stemming from sudden changes in investor sentiment. Equity market liberalizations, on the other hand, have promoted growth in almost every liberalizing country. Yet equity market liberalization...

This paper analyzes the nature of economic dynamics in a one-sector optimal growth model in which the technology is generally nonconvex, nondifferentiable, and discontinuous. The model also allows for irreversible investment and unbounded growth. We develop various tools to overcome the technical difficulties posed by the generality of the model. We provide sufficient conditions for optimal pat...

Generally, high oil prices slow economic growth, cause inflationary pressures and creates global imbalances. In addition, oil price volatility increase uncertainty and restrain the much-needed investment in the capital market. Thus, this paper applies the Augmented Dickey Fuller and Johansen Co-integration Tests in which the effect of oil price volatility, crude oil price and stock price is ana...

This paper extends the Kaldor-Kalecki model of business cycle with retardation to include anticipatory capabilities. There is a time shift between a decision of investment and its actual installation. The results, presented in this paper, deal with the inclusion of an anticipated capital stock in the Kaldor-Kalecki model. A third equation is added to the classical two equations of Kaldor-Kaleck...

I will set the problem up as a decentralized model, studying first the behavior of households and then the behavior of firms. There are two primary ways of setting the model up, which both yield identical solutions. In both households own the firms, but management and ownership are distinct, and so households behave as though firm profits are given. In one formulation firms own the capital stoc...

The stock market participation rate for U.S. households with assets in both taxable and tax-deferred accounts is increasing with age in taxable accounts and decreasing with age in tax-deferred accounts. This paper asks whether a quantitative life-cycle model of portfolio choice can match these life-cycle patterns of stock market participation. The model incorporates several key features into a ...

The change in the business model of venture capitalists from investing locally towards investing across borders started to intensify in the late 1990s. According to a dataset of European and NorthAmerican countries, we find that countries with higher expected growth and higher lagged stock market returns receive larger net cross-border venture capital inflows. Thus, portfolio companies located ...

This paper studies how the difference between technical depreciation and tax depreciation affects the firm’s optimal investment strategy. The objective is maximization of shareholder value. When tax depreciation differs from technical depreciation, an additional investment not only generates value due to the fact that the firm can produce more, but also due to the fact that an additional deferr...