We propose a continuous-time heterogeneous agent model consisting of fundamental, momentum, and contrarian traders to explain the significant time series momentum. We show that the performance of momentum strategy is determined by both time horizon and the market dominance of momentum traders. Specifically, when momentum traders are more active in the market, momentum strategies with short (long) time horizons stabilize (destabilize) the market, and meanwhile the market under-reacts (over-reacts) in short-run (long-run). This provides profit opportunity for time series momentum strategies with short horizons and reversal with long horizons. When momentum traders are less active in the market, they always lose. The results provide an insight into the profitability of time series momentum documented in recent empirical studies.

We document that leased capital constitutes about 30% of the total productive physical assets used by US public firms. We develop an analytical framework to demonstrate how the neglect of leases leads to an overestimation of productivity. This overestimation can be decomposed into two distinct channels: one arises from the mismeasured factor share, and the other from the omitted-leased-capital channel. Empirically, we find that the overestimation of aggregate productivity is substantial, has been increasing over time, and exhibits strong countercyclicality. In the cross-section, the decomposition of overestimation presents asymmetric patterns for firms of different sizes and levels of financial constraint. Our findings highlight the critical importance of explicitly accounting for the “unmeasured” leased capital in studies on productivity measurements.