We demonstrate that a financial intermediary-based asset pricing model offers a compelling explanation for a new set of conditional moments of equity term structure and convenience yields. The model’s key mechanism is that the time-varying tightness of intermediaries’ leverage constraints drives significant mean reversion in the price of risk. This model guides us in devising a novel empirical methodology to estimate the tightness of these constraints (i.e., the Relative Tightness Index) from cross-sectional returns of various asset classes. Our findings affirm that this measure significantly drives the dynamics of equity yield slope and convenience yields, both empirically and quantitatively.

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.

International transactions are costly because they require investments in logistics, contracts, and the acquisition of local institutional knowledge. We posit that a portion of the fixed cost of entering a specific export market can be used toward covering the cost of acquiring imported inputs from that same market, and vice versa. Using dis-aggregated transactions data for Chinese firms from 2000 to 2015, we document firm-level trading patterns suggesting such bilateral economies of scope. Through a structural model, we estimate that the simultaneous export and import in a given country reduce export and import fixed costs by around 42 and 35 percent, respectively.