IDEAS home Printed from https://ideas.repec.org/p/osf/socarx/4pysq_v1.html

Firm Optimization across Capital Forms

Author

Listed:
  • Lee, Woongki

    (Yonsei University)

Abstract

This study derives a model of firm optimization across capital forms and incorporates the resulting optimality conditions into asset pricing. The structure of the problem depends on how profitability is modeled. When profitability is endogenous, optimization is grounded in production decisions; when profitability is exogenous, it is organized around operating profit. These alternative assumptions yield two asset pricing frameworks, each with a factor representation derived from the firm’s decision margins. By relating these representations to established pricing factors, the study provides a structured economic basis for reinterpreting established factors through firm optimization.

Suggested Citation

  • Lee, Woongki, 2026. "Firm Optimization across Capital Forms," SocArXiv 4pysq_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:4pysq_v1
    DOI: 10.31235/osf.io/4pysq_v1
    as

    Download full text from publisher

    File URL: https://osf.io/download/6a75c203748d64459b0c5513/
    Download Restriction: no
    File URL: https://libkey.io/10.31235/osf.io/4pysq_v1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Novy-Marx, Robert, 2013. "The other side of value: The gross profitability premium," Journal of Financial Economics, Elsevier, vol. 108(1), pages 1-28.
    2. Lars-Alexander Kuehn & Mikhail Simutin & Jessie Jiaxu Wang, 2017. "A Labor Capital Asset Pricing Model," Journal of Finance, American Finance Association, vol. 72(5), pages 2131-2178, October.
    3. Campbell, John Y, 1993. "Intertemporal Asset Pricing without Consumption Data," American Economic Review, American Economic Association, vol. 83(3), pages 487-512, June.
    4. Mayers, David, 1973. "Nonmarketable Assets and the Determination of Capital Asset Prices in the Absence of a Riskless Asset," The Journal of Business, University of Chicago Press, vol. 46(2), pages 258-267, April.
    5. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 298-345, April.
    6. Cochrane, John H, 1991. "Production-Based Asset Pricing and the Link between Stock Returns and Economic Fluctuations," Journal of Finance, American Finance Association, vol. 46(1), pages 209-237, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hassan Zada & Naveed Khan & Kai-Yin Woo & Sana Gaied Chortane, 2025. "Asset Pricing: A Comparative Analysis of Fama-French Five-Factor with Human Capital-Based Six-Factor Model," Advances in Decision Sciences, Asia University, Taiwan, vol. 29(4), pages 1-37.
    2. Betermier, Sebastien & Calvet, Laurent E. & Jo, Evan, 2019. "A Supply and Demand Approach to Equity Pricing," CEPR Discussion Papers 13974, Centre for Economic Policy Research.
    3. Xiaoji Lin & Ding Luo & Andres Donangelo & Frederico Belo, 2017. "Labor Hiring, Aggregate Dividends, and Return Predictability in the Time Series," 2017 Meeting Papers 885, Society for Economic Dynamics.
    4. Christopher Anderson, 2021. "Consumption-Based Asset Pricing When Consumers Make Mistakes," Finance and Economics Discussion Series 2021-015, Board of Governors of the Federal Reserve System (U.S.).
    5. Bollerslev, Tim & Xu, Lai & Zhou, Hao, 2015. "Stock return and cash flow predictability: The role of volatility risk," Journal of Econometrics, Elsevier, vol. 187(2), pages 458-471.
    6. Moinak Maiti & Darko Vuković, 2020. "Role of human assets in measuring firm performance and its implication for firm valuation," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-27, December.
    7. Wing-Keung Wong & Riffat Mughal & Mustafa Afeef & Naveed Khan & Hassan Zada, 2026. "Human Capital Based Six-Factor Asset Pricing Model in the Era of Covid-19," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 33(1), pages 25-63, March.
    8. Ray Ball & Gil Sadka & Ronnie Sadka, 2009. "Aggregate Earnings and Asset Prices," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 47(5), pages 1097-1133, December.
    9. Penman, Stephen & Zhu, Julie, 2022. "An accounting-based asset pricing model and a fundamental factor," Journal of Accounting and Economics, Elsevier, vol. 73(2).
    10. Ilan Cooper & Paulo Maio, 2019. "Asset Growth, Profitability, and Investment Opportunities," Management Science, INFORMS, vol. 65(9), pages 3988-4010, September.
    11. Mauro Costantini & Ricardo M. Sousa, 2020. "Consumption, asset wealth, equity premium, term spread, and flight to quality," European Financial Management, European Financial Management Association, vol. 26(3), pages 778-807, June.
    12. Gonçalves, Andrei S., 2021. "The short duration premium," Journal of Financial Economics, Elsevier, vol. 141(3), pages 919-945.
    13. Campbell, John Y., 2003. "Consumption-based asset pricing," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 13, pages 803-887, Elsevier.
    14. Esther Eiling & Raymond Kan & Ali Sharifkhani, 2018. "Sectoral Labor Reallocation and Return Predictability," Working Papers 2018-006, Human Capital and Economic Opportunity Working Group.
    15. Chen, Jian & Jiang, Fuwei & Liu, Yangshu & Tu, Jun, 2017. "International volatility risk and Chinese stock return predictability," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 183-203.
    16. Dunbar, Kwamie, 2021. "Pricing the hedging factor in the cross-section of stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
    17. Huse, Cristian, 2011. "Term structure modelling with observable state variables," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3240-3252.
    18. Shaun Bond & Hui Guo & Changyu Yang, 2025. "Systematic Mispricing: Evidence from Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 71(3), pages 420-452, October.
    19. John Y. Campbell, 2008. "Viewpoint: Estimating the equity premium," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 1-21, February.
    20. Beeler, Jason & Campbell, John Y., 2012. "The Long-Run Risks Model and Aggregate Asset Prices: An Empirical Assessment," Critical Finance Review, now publishers, vol. 1(1), pages 141-182, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:osf:socarx:4pysq_v1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: OSF (email available below). General contact details of provider: https://socarxiv.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.