Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/55548
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dc.contributor.authorOzdagli, Ali K.en_US
dc.date.accessioned2009-12-09en_US
dc.date.accessioned2012-02-23T07:59:24Z-
dc.date.available2012-02-23T07:59:24Z-
dc.date.issued2009en_US
dc.identifier.urihttp://hdl.handle.net/10419/55548-
dc.description.abstractThis paper presents a dynamic model of the firm with risk-free debt contracts, investment irreversibility, and debt restructuring costs. The model fits several stylized facts of corporate finance and asset pricing: First, book leverage is constant across different book-to-market portfolios, whereas market leverage differs significantly. Second, changes in market leverage are mainly caused by changes in stock prices rather than by changes in debt. Third, when the model is calibrated to fit the cross-sectional distribution of book-to-market ratios, it explains the return differences across different firms. The model also shows that investment irreversibility alone cannot generate the cross-sectional patterns observed in stock returns and that leverage is the main source of the value premium.en_US
dc.language.isoengen_US
dc.publisher|aFederal Reserve Bank of Boston |cBoston, MAen_US
dc.relation.ispartofseries|aWorking paper series // Federal Reserve Bank of Boston |x09-13en_US
dc.subject.jelG1en_US
dc.subject.jelG3en_US
dc.subject.ddc330en_US
dc.titleFinancial leverage, corporate investment, and stock returnsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn614595061en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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