The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Information Quality and Long‐Run Risk: Asset Pricing Implications
Published: 07/15/2010 | DOI: 10.1111/j.1540-6261.2010.01572.x
HENGJIE AI
I study the asset pricing implications of the quality of public information about persistent productivity shocks in a general equilibrium model with Kreps–Porteus preferences. Low information quality is associated with a high equity premium, a low volatility of consumption growth, and a low volatility of the risk‐free interest rate. The relationship between information quality and the equity premium differs from that in endowment economies. My calibration improves substantially upon the Bansal–Yaron model in terms of the moments of the wealth–consumption ratio and the return on aggregate wealth.
A Unified Model of Firm Dynamics with Limited Commitment and Assortative Matching
Published: 10/04/2020 | DOI: 10.1111/jofi.12980
HENGJIE AI, DANA KIKU, RUI LI, JINCHENG TONG
We develop a unified theory of dynamic contracting and assortative matching to explain firm dynamics. In our model, neither firms nor managers can commit to arrangements that yield lower payoffs than their outside options, which are microfounded by the equilibrium conditions in a matching market. The model endogenously generates power laws in firm size and CEO compensation, and explains differences in their right tails. We also show that our model quantitatively accounts for many salient features of the time‐series dynamics and the cross‐sectional distribution of firm investment, dividend payout, and CEO compensation.