Rethinking Production Under Uncertainty

Cochrane, John H.

doi:10.3386/w26535

Cited by 7 publications

(4 citation statements)

References 44 publications

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“…Hirshleifer (, , ) extends the Fisherian equilibrium into a world with uncertainty, using the state‐preference approach of Arrow () and Debreu (). Diamond () and Hirshleifer () also contain an early formation of state‐contingent production, a theme echoed later by Cochrane () and Belo ().…”

Section: The Big Picturementioning

confidence: 83%

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The Investment CAPM

Zhang

2017

Euro Fin Management

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A new class of Capital Asset Pricing Models (CAPM) arises from the first principle of real investment for individual firms. Conceptually as ‘causal’ as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a leading asset pricing paradigm. Firms do a good job in aligning investment policies with costs of capital, and this alignment drives many empirical patterns that are anomalous in the consumption CAPM. Most important, integrating the anomalies literature in finance and accounting with neoclassical economics, the investment CAPM has succeeded in mounting an efficient markets counterrevolution to behavioural finance over the past 15 years.

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Section: The Big Picturementioning

confidence: 83%

“…Cochrane () emphasises that standard production technologies restrict firms from adjusting their output across states of nature. Cochrane formulates a flexible state‐contingent production technology to overcome this limitation, and derives a stochastic discount factor as firms' marginal rate of transformation.…”

Section: Structural Estimation and Testsmentioning

confidence: 99%

The Investment CAPM

Zhang

2017

Euro Fin Management

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“…Intuitively, the market value of growth firms varies more drastically with productivity shocks in booms, when capital is abundant, as positive shocks are propagated by low investment costs. Cochrane (1993) emphasizes that standard production technologies restrict firms from adjusting their output across states of nature. Cochrane formulates a flexible state-contingent production technology to overcome this limitation, and derives a stochastic discount factor as firms' marginal rate of transformation.…”

Section: Investment-based Asset Pricing Testsmentioning

confidence: 99%

“…Hirshleifer (1965Hirshleifer ( , 1966Hirshleifer ( , 1970 extends the Fisherian equilibrium into a world with uncertainty, using the state-preference approach of Arrow (1964) and Debreu (1959). Diamond (1967) and Hirshleifer (1970) also contain an early formation of state-contingent production, a theme echoed later by Cochrane (1993) and Belo (2010). Jorgenson (1963) formulates a model of investment demand with capital as a factor of production, and introduces the concept of the user cost of capital as the rental price of capital services.…”

Section: Figure 3 the Fisherian Equilibriummentioning

confidence: 99%

The Investment CAPM

Zhang

2017

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Andreas Stathopoulos, and especially Chen Xue for helpful comments. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Housing risk and the cross section of returns across many asset classes

Ma,

Zhang

2024

Real Estate Economics

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This article documents that a single‐factor model based on shocks to the residential investment share, or the ratio of residential‐to‐nonresidential investment, exhibits strong explanatory power for expected returns across various characteristic‐sorted portfolios in equity and other asset classes. The residential investment share captures time‐varying demand for housing services and is a state variable of the economy. Consequently, innovations to the share emerge as a risk factor in asset prices in the cross section. The empirical results are robust to controlling for other factor models based on durable consumption, financial intermediaries, household heterogeneity, and return‐based multifactor models designed to price these assets.

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Rethinking Production Under Uncertainty

Cited by 7 publications

References 44 publications

The Investment CAPM

The Investment CAPM

The Investment CAPM

Housing risk and the cross section of returns across many asset classes

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