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Asset Collateralizability and the Cross-Section of Expected Returns
| Content Provider | Semantic Scholar |
|---|---|
| Author | Schlag, Christian Ai, Hengjie |
| Copyright Year | 2017 |
| Abstract | This paper studies the implications of credit market imperfections for the cross-section of stock returns. Theory implies that the tightness of financing con- straints is countercyclical. As a result, collateralizable capital provides insurance against aggregate shocks, because it can be used to relax financing constraints. We present a production-based general equilibrium model model to quantify the effect of the above channel on the cross-section of expected returns. Consistent with the predictions of our model, we find in the data that stock returns for firms with a larger share of non-collateralizable capital are on average 4.8% higher an- nually than those for firms with a lower share. Our model can quantitatively reproduce the magnitude of the return spread as observed in the data. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2018&paper_id=1755 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
