A common prediction of macroeconomic models of credit market frictions is that the tightness of financial constraints is countercyclical. As a result, theory implies a negative collateralizability premium; that is, capital that can be used as collateral to relax financial constraints provides...

This paper studies how the durability of assets affects the cross-section of stock returns. More durable assets incur lowers frictionless user costs but are more "expensive", in the sense that they need more down payments making them hard to finance. In recessions, firms become more financially...

We study asset pricing implications of return extrapolation in a Lucas economy. We find that the effect of extrapolation is mainly on short rates rather than risk premia, time variation in expected returns is mainly driven by time-varying short rates, and return volatility can be lower than...

New empirical facts show that equity term premium is counter-cyclical, while the term structure of equity yield is pro-cyclical and switches sign between expansions and recessions. We decompose the term structure of equity yield into an equity term premium and a mean reversion component about...

This paper demonstrates a novel risk premium channel for firms' dynamic lease versus buy decision. In a typical operating lease contract, a less financially constrained lessor (capital owner) effectively provides an insurance mechanism to a more constrained lessee (capital borrower) against the...

We introduce imperfect information and parameter learning into a production-based asset pricing model. Our model features slow learning about firms' exposure to aggregate productivity shocks over time. In contrast to a full information case, our framework provides a unified explanation for the...