In the theory of finance, capital markets provide securities which allow the ownership of productive assets to be allocated among investors according to their willingness to bear risk in exchange for return, and independently of their tastes for the productive services provided by the assets. This paper uses the theory of finance to study the role of money as a productive asset and the transformation of money into a portfolio asset. True to its purpose, the capital market provides securities-nominal bonds-that allow an allocation of the current services of the money supply according to its current productivity and without regard for its future purchasing power risk, and an allocation of the future purchasing power risk of the money supply according to the willingness of investors to bear this risk in exchange for return and without regard for investor needs for the future transactions services of money. In open

A five-factor model that adds profitability (RMW) and investment (CMA) factors to the three-factor model of Fama and French (1993) suggests a shared story for several average-return anomalies. Specifically, positive exposures to RMW and CMA (stock returns that behave like those of profitable firms that invest conservatively) capture the high average returns associated with low market β, share repurchases, and low stock return volatility. Conversely, negative RMW and CMA slopes (like those of relatively unprofitable firms that invest aggressively) help explain the low average stock returns associated with high β, large share issues, and highly volatile returns.