Seminar series of the Finance Economics and Econometrics Lab Speaker: Laurent Calvet (Edhec). Title: “A Supply and Demand Approach to Equity Pricing ” joint with Sebastien Betermier (McGill Univ) and Evan Jo (Mc Gill Univ). Date: Thursday, November 25th at...
More
Seminar series of the Finance Economics and Econometrics Lab Speaker: Laurent Calvet (Edhec). Title: “A Supply and Demand Approach to Equity Pricing ” joint with Sebastien Betermier (McGill Univ) and Evan Jo (Mc Gill Univ). Date: Thursday, November 25th at 12h30 (Paris Time). Abstract: We develop a tractable general equilibrium framework providing a direct mapping between (i) the supply and demand for capital at the firm level and (ii) the cross-section of stock returns. Investor behavioral tilts and hedging needs drive capital supply, while firm profitability drives demand. Heterogeneity in supply and demand factors determines the sign of the risk-return relation and generates anomalies such as betting-against-beta, betting-against-correlation, size, value, investment, and profitability. We estimate the supply and demand schedules of over 4,000 U.S. firms and verify that the model accurately predicts the sign of the risk-return relation conditional on characteristics. You will find th
Less
