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discounting. A commonly recognized bias of standard elicitation techniques is the use of linear preferences for identification … utility function curvature. We present a new methodology for identifying time preferences, both discounting and utility … obtained, dynamically consistent discounting, and limited though significant utility function curvature …
Persistent link: https://www.econbiz.de/10013138321
The term structure of equity returns is downward-sloping: stocks with high cash flow duration earn 1.10% per month lower returns than short-duration stocks in the cross section. I create a measure of cash flow duration at the firm level using balance sheet data to show this novel fact. Factor...
Persistent link: https://www.econbiz.de/10012984772
This paper surveys the field of asset pricing. The emphasis is on the interplay between theory and empirical work, and on the tradeoff between risk and return. Modern research seeks to understand the behavior of the stochastic discount factor (SDF) that prices all assets in the economy. The...
Persistent link: https://www.econbiz.de/10012763342
While many studies document that the market risk premium is predictable and that betas are not constant, the dividend discount model ignores time-varying risk premiums and betas. We develop a model to consistently value cashflows with changing risk-free rates, predictable risk premiums and...
Persistent link: https://www.econbiz.de/10013311909
The optimal investment to mitigate climate change crucially depends on the discount rate used to evaluate the investment's uncertain future benefits. The appropriate discount rate is a function of the horizon over which these benefits accrue and the riskiness of the investment. In this paper, we...
Persistent link: https://www.econbiz.de/10013011083
We confront the one-factor production-based asset pricing model with the evidence on firm-level investment, to uncover that it produces implications for the dynamics of capital that are seriously at odds with the evidence. The data shows that, upon being hit by adverse profitability shocks,...
Persistent link: https://www.econbiz.de/10013024871
Buyout booms form in response to declines in the aggregate risk premium. We document that the equity risk premium is the primary determinant of buyout activity rather than credit-specific conditions. We articulate a simple explanation for this phenomenon: a low risk premium increases the present...
Persistent link: https://www.econbiz.de/10012986691
The choice of discount rate has a significant impact on net benefit estimates when costs today have benefits over long time horizons. Standard U.S. government practice for cost–benefit analysis is to bound such analysis using two alternative rates. These rates are meant to represent the rate...
Persistent link: https://www.econbiz.de/10012906264
This paper summarizes studies that investigated the relation between temporal discounting and alcohol consumption. The … drinkers and problem drinkers both showed higher rates of temporal discounting than light drinkers, and this difference was … temporal discounting than an exponential function. A third study evaluated predictors of relapse and continued resolution in …
Persistent link: https://www.econbiz.de/10013220398
In this paper we develop alternative ways to compare asset pricing models when it is understood that their implied stochastic discount factors do not price all portfolios correctly. Unlike comparisons based on x2 statistics associated with null hypothesis that models are correct, our measures of...
Persistent link: https://www.econbiz.de/10013225177