54 Pages Posted: 19 Mar 2017
Date Written: March 2017
We examine the importance of asset pricing anomalies (alphas) for the real economy. We develop a novel quantitative model with lumpy investment that features such informational inefficiencies and yields closed-form solutions for cross-sectional distributions of firm dynamics. Our findings indicate that anomalies can cause material real inefficiencies, raising the possibility that agents that help eliminate them can provide significant value added to the economy. The framework reveals that alphas alone are poor indicators of real distortions, and that efficiency losses depend on the persistence of alphas, the amount of mispriced capital, and the Tobin's q of firms affected.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Suggested Citation: Suggested Citation
Register to save articles to
This is a National Bureau of Economic Research Paper. NBER charges a fee of $5.00 for this paper.
File name: nber.pdf
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.