Permanent versus transitory systemic shocks and corporate policies.

Implementing the asset pricing theories in a practical field as corporate finance is crucial in order to obtain optimal performance. Unfortunately, this link is missing and there are only few attempts in the past literature. There is, however, a strong will to understand what is behind the optimal performances of a firm, which can be found in the increasing interest shown in the term structure of equity premium studies. Despite the debate on its sign, the literature agrees on the fact that ignoring the slope is the farthest strategy to obtain optimal results. Therefore, the correlation analysis in this thesis aims to answer this need by looking for a connection between the correlation with the market (systemic variable: U.S. GDP) and the considered business measures (firm-specific variables: Total Asset and Cash Flow). The novelty in this work is the filtration, into permanent and transitory components, of the systemic variable rather than the firm-specific ones. The weak patterns found consist in the connection between high values of total assets and low but positive levels of correlation with respect to both components of the U.S. GDP; and the connection between high values of cash flow and high levels of correlation with respect to both components of the U.S. GDP. These results are not always satisfied, hence, this analysis would be better used as starting point for future analysis including the corporate policies, rather than an actual tool to establish their efficiency.