We present a new approach for estimating small business equity returns. This approach applies the Merton (1974) credit model to the returns on entrepreneurial business credit card debt securitizations and solves for the implied equity returns for the small businesses owned by the cardholders. The estimated small business equity premium is 10.74%. The standard deviation of small business equity returns is 56.37%. We validate the methodology by applying it to investment‐grade corporate bonds and recovering a public equity premium of 6.17%.

Using the dispersion in stock returns during the financial crisis as a source of exogenous variation in the wealth of Norwegian entrepreneurs who held listed stocks, I show that adverse shocks to the wealth of business owners had large effects on their firms' financing, employment, and investment. The effects on investment and employment are driven by young firms, that obtain differentially less bank financing following an owner wealth shock. The effects on employment operate primarily through reduced hiring. My findings highlight that equity‐financing frictions and the procyclicality of entrepreneurial wealth are important channels that can amplify economic shocks.

Target date funds (TDFs) are designed to provide unsophisticated or inattentive investors with age‐appropriate exposures to different asset classes like stocks and bonds. The rise of TDFs has moved a significant share of retirement investors into macrocontrarian strategies that sell stocks after relatively good stock market performance. This rebalancing drives contrarian flows across equity mutual funds held by TDFs, stabilizing their funding, and reduces stock returns for stocks disproportionately held by these funds when stock market returns are relatively high. Continued growth in TDFs and similar investment products may dampen stock market volatility and increase the transmission of shocks across asset classes.

We study return predictability using a model of speculative trading among competitive traders who agree to disagree about the precision of private information. Although traders apply Bayes' Law consistently, returns are predictable. In addition to trading on long‐term fundamental value, traders also trade on perceived short‐term opportunities arising from foreseen future disagreement, as in a Keynesian beauty contest. Contradicting conventional wisdom, this short‐term speculation dampens price fluctuations and generates time‐series momentum. Model calibration shows quantitatively realistic patterns of return dynamics. Consistent with empirical evidence, our model predicts more pronounced momentum for stocks with higher trading volume.