Based on a study, imperfect information and learning into a production-based asset pricing model, focusing on firms’ exposure to aggregate productivity shocks over time. A model shows that old capital firms exhibit higher capital allocation efficiency, greater exposure to productivity shocks, and earn higher expected returns, termed as capital age premium. Additionally, they have shorter cash-flow duration compared to young capital firms. This framework provides a unified explanation for the empirical features of stocks differing in capital age.

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