| Abstract: |
We provide a unified explanation for two significant trends over recent decades: the decline of the value premium and the rise of the markup. We show that these trends are primarily driven by high-markup firms, while both the value premium and the markup remain stable among firms with low markups. We develop a dynamic monopolistic competitive equilibrium model featuring a stochastic technology frontier and heterogeneity in firms’ technology adoption decisions to explain these findings. We show that both the cross-time increase in the efficiency of the aggregate technology frontier and cross-firm heterogeneities in adoption benefits and demand elasticity are crucial to generate the observed trends in markups and the value premium, as well as the cross-sectional difference in these trends.
|
|
Biography:
|
Dr. Xiaoji Lin is the US Bancorp Professor in Financial Markets and Institutions and a Professor of Finance at the University of Minnesota, Carlson School of Management. Before joining Minnesota in 2018, Dr. Lin taught at London School of Economics and Political Science and the Ohio State University (tenured in 2018). His research fields include asset pricing, corporate finance, and macroeconomics. Dr. Lin has published at leading academic journals including American Economic Review, Journal of Political Economy, Journal of Financial Economics, Journal of Monetary Economics, and Review of Financial Studies. His doctoral thesis won the Trefftzs award at 2008 Western Finance Association annual meetings. He is also the recipient of the Carlson School Outstanding Research Award in 2021.
|
