As a consequence of optimal investment choices, a firm's assets and growth options change
in predictable ways. Using a dynamic model, we show that this imparts predictability to …

A dynamic model of a multistage investment project that captures many features of research
and development (R&D) ventures and start-up companies is developed. An important …

We derive a parsimonious rational model of active portfolio management that reproduces
many regularities widely regarded as anomalous. Fund flows rationally respond to past …

This article argues that the size-related regularities in asset prices should not be regarded
as anomalies. Indeed, the opposite result is demonstrated. Namely, a truly anomalous …

Using the value that a mutual fund extracts from capital markets as the measure of skill, we
find that the average mutual fund has used this skill to generate about $3.2 million per year. …

We derive the optimal labor contract for a levered firm in an economy with perfectly competitive
capital and labor markets. Employees become entrenched under this contract and so …

We propose a new method of testing asset pricing models that relies on quantities rather
than just prices or returns. We use the capital flows into and out of mutual funds to infer which …

Historically, the literature on money management has inconsistently applied the rational
expectations equilibrium concept. We explain why and summarize developments in the money …

The review process for academic journals in economics has grown vastly more extensive
over time. Journals demand more revisions, and papers have become bloated with numerous …

This paper shows that the existence of managerial ability, combined with the labor contract
prevalent in the industry, implies that the closed‐end fund discount should exhibit many of the …