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The average nominal share prices of common stocks traded on the New York Stock Exchange have remained constant at approximately $35 per share since the Great Depression as a result of stock splits. It is surprising that U.S. firms actively maintained constant nominal prices for their shares...
Persistent link: https://www.econbiz.de/10005014603
There is a worldwide trend toward defined contribution saving plans and growing interest in privatized Social Security plans. In both environments, individuals are given some responsibility to make their own asset-allocation decisions, raising concerns about how well they do at this task. This...
Persistent link: https://www.econbiz.de/10005820282
One of the most important predictions of the dividend-signaling hypothesis is that dividend changes are positively correlated with future changes in profitability and earnings. Contrary to this prediction, we show that, after controlling for the well-known nonlinear patterns in the behavior of...
Persistent link: https://www.econbiz.de/10005728384
As firms switch from defined-benefit plans to defined-contribution plans, employees bear more responsibility for making decisions about how much to save. The employees who fail to join the plan or who participate at a very low level appear to be saving at less than the predicted life cycle...
Persistent link: https://www.econbiz.de/10005735161
The equity premium puzzle, first documented by Mehra and Prescott, refers to the empirical fact that stocks have greatly outperformed bonds over the last century. As Mehra and Prescott point out, it appears difficult to explain the magnitude of the equity premium within the usual economics...
Persistent link: https://www.econbiz.de/10005714250
We study how decision makers choose when faced with multiple plays of a gamble or investment. When evaluating multiple plays of a simple mixed gamble, a chance to win x or lose y, subjects show a sensitivity to the amount to lose on a single trial, holding the distribution of returns for the...
Persistent link: https://www.econbiz.de/10009213956
In his Nobel Prize acceptance speech given in 1985, Franco Modigliani drew attention to the "annuitization puzzle": that annuity contracts, other than pensions through group insurance, are extremely rare. Rational choice theory predicts that households will find annuities attractive at the onset...
Persistent link: https://www.econbiz.de/10009364396
The equity premium puzzle refers to the empirical fact that stocks have outperformed bonds over the last century by a surprisingly large margin. The authors offer a new explanation based on two behavioral concepts. First, investors are assumed to be 'loss averse,' meaning that they are...
Persistent link: https://www.econbiz.de/10005737759
Standard economic theories of saving implicitly assume that households have the cognitive ability to solve the relevant optimization problem and the willpower to execute the optimal plan. Both of the implicit assumptions are suspect. Even among economists, few spend much time calculating a...
Persistent link: https://www.econbiz.de/10005756956
Many dividend theories imply that changes in dividends have information content about the future earnings of the firm. The authors investigate this implication and find only limited support for it. Firms that increase dividends in year 0 have experienced significant earnings increases in years...
Persistent link: https://www.econbiz.de/10005302857