Minimal dynamic equilibria
Minimal dynamic equilibria
We introduce an out-of-sample neural-network-based measure of firm-level operating leverage, which outperforms existing ones in capturing the elasticity of operating profits to gross profits. Strikingly, our analysis uncovers a non-monotonicÃÂand potentially negativeÃÂrelationship between operating leverage and the risk premium. This challenges conventional wisdom and contradicts explanations that link operating leverage to the value premium. A production-based asset pricing model incorporating both variable and fixed costs provides a possible rationale for these empirical findings. Furthermore, our analysis offers a fresh perspective on the idiosyncratic volatility premium by emphasizing the interplay between the operating hedge effect induced by variable costs and the operating leverage effect induced by fixed costs.
We introduce an out-of-sample neural-network-based measure of firm-level operating leverage, which outperforms existing ones in capturing the elasticity of operating profits to gross profits. Strikingly, our analysis uncovers a non-monotonicÃÂand potentially negativeÃÂrelationship between operating leverage and the risk premium. This challenges conventional wisdom and contradicts explanations that link operating leverage to the value premium. A production-based asset pricing model incorporating both variable and fixed costs provides a possible rationale for these empirical findings. Furthermore, our analysis offers a fresh perspective on the idiosyncratic volatility premium by emphasizing the interplay between the operating hedge effect induced by variable costs and the operating leverage effect induced by fixed costs.

Keynote: "Lessons from fintech-academic collaborations"
25-27 August 2025
25/08/2025
Antonio Gargano
Keynote

Keynote: "Lessons from fintech-academic collaborations"
25-27 August 2025
25/08/2025
Antonio Gargano
Keynote

Keynote: "Leadership for finance professionals: A CEO-turned-leadership-scholar perspective"
25-27 August 2025
25/08/2025
Emilia Bunea
Keynote

Keynote: "Leadership for finance professionals: A CEO-turned-leadership-scholar perspective"
25-27 August 2025
25/08/2025
Emilia Bunea
Keynote

Keynote: "The promise of digital finance: Greater transparency, enhanced efficiency, and more effective and less burdensome regulation"
25-27 August 2025
26/08/2025
Allan Mendelowitz
Keynote

Keynote: "The promise of digital finance: Greater transparency, enhanced efficiency, and more effective and less burdensome regulation"
25-27 August 2025
26/08/2025
Allan Mendelowitz
Keynote

Keynote: "What we can learn today about the markets of tomorrow: Crypto, crashes and credible research"
25-27 August 2025
27/08/2025
Albert Menkveld
Keynote

Keynote: "What we can learn today about the markets of tomorrow: Crypto, crashes and credible research"
25-27 August 2025
27/08/2025