Related papers: Should employers pay their employees better? An as…

The implementation of a supervision and incentive process for identical workers may lead to wage variance that stems from employer and employee optimization. The harder it is to assess the nature of the labor output, the more important such…

The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…

Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…

An employer contracts with a worker to incentivize efforts whose productivity depends on ability; the worker then enters a market that pays him contingent on ability evaluation. With non-additive monitoring technology, the interdependence…

Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement…

This note investigates the causes of the quality anomaly, which is one of the strongest and most scalable anomalies in equity markets. We explore two potential explanations. The "risk view", whereby investing in high quality firms is…

We investigate whether the tails of firm-level idiosyncratic return distributions are driven by common shocks. We use quantile factor analysis to extract such common idiosyncratic quantile factors with asymmetric pricing effects and we find…

In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…

An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…

Searching for new effective risk factors on stock returns is an important research topic in asset pricing. Factor modeling is an active research topic in statistics and econometrics, with many new advances. However, these new methods have…

On a periodic basis, publicly traded companies are required to report fundamentals: financial data such as revenue, operating income, debt, among others. These data points provide some insight into the financial health of a company.…

We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…

This agent-based model contributes to a theory of corporate culture in which company performance and employees' behaviour result from the interaction between financial incentives, motivational factors and endogenous social norms. Employees'…

When analyzing the components influencing the stock prices, it is commonly believed that economic activities play an important role. More specifically, asset prices are more sensitive to the systematic economic news that impose a pervasive…

This paper proposes an addition to the firm-based perspective on intra-industry profitability differentials by modelling a business organisation as a complex adaptive system. The presented agent-based model introduces an endogenous…

We consider a financial market in which two securities are traded: a stock and an index. Their prices are assumed to satisfy the Black-Scholes model. Besides assuming that the index is a tradable security, we also assume that it is…

The design of data markets has gained importance as firms increasingly use machine learning models fueled by externally acquired training data. A key consideration is the externalities firms face when data, though inherently freely…

We argue that the recent growth in income inequality is driven by disparate growth in investment income rather than by disparate growth in wages. Specifically, we present evidence that real wages are flat across a range of professions,…

Automation raises productivity and reduces paid human labor, but it also reallocates income and ownership claims. This paper studies that tradeoff in a static benchmark and in a stationary heterogeneous-agent general equilibrium. Firms…

We introduce a novel framework that considers how a firm could fairly compensate its workers. A firm has a group of workers, each of whom has varying productivities over a set of tasks. After assigning workers to tasks, the firm must then…