Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 19, 2023 erstellt
Beschreibung:
In asset pricing, mean reversion in productivity is known to explain the value premium when investment entails irreversible costs. In this paper, I show that the speed of mean reversion in idiosyncratic productivity is time-varying: it switches between high persistence state and low persistence state. Firms have different optimal investment decisions anticipating this time-varying persistence of productivity, which adds more dynamics to the value premium. More specifically, in low persistence state or in the state with fast mean reversion, there is more cost irreversibility, disinvestment rate is low, and value premium is positive, while in high persistence state or in the state with slow mean reversion, there is less cost irreversibility, and disinvestment rate is high, and value premium is negative and more uncertain