Labor Leverage, Firms Heterogeneous Sensitivities to the Business Cycle, and the Cross-Section of Returns

摘要: Corporate profits are volatile and highly procyclical in the aggregate, but there is substantial heterogeneity across firms extent of this procyclicality: I document that with lower productivity or higher book-to-market have more profits. A simple static profit maximization problem can rationalize this. Firms which should also betas expected returns. Estimating an asset pricing model aggregate real wage as factors validates prediction. This economic story helps account for size value premia, yields rich empirical implications by linking firms' financial characteristics.