We study the association of the perseverance-of-effort (PoE) and the consistency-of-interests (CoI) components of the psychological measure of grit, with economic measures of impatience and decreasing impatience (time inconsistency), respectively, in the general population. We find that...

Current theories of the discount rate have a theoretical basis focused on risk; risk-free rate and risk premium. The basic component of the discount rate, the risk-free rate as purely empirical has a natural infirmity which consequently weakens the final theory. Similarly, the risk premium...

This paper explores the implications of consumption heterogeneity between domestic and foreign investors on the cross-section of stock returns in a host country. We argue that foreign investors in a small open economy integrated into global financial markets may face consumption risk, which...

We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is...

Prior laboratory studies suggest that scarcity increases delay discounting (devaluation of delayed outcomes) and disturbs other decision-making processes. Recent evidence on the effect of COVID-19 on delay discounting is mixed. In addition, no study has examined the effect of COVID-19-related...

Estimates the expected present discounted value (EPDV) of future payouts on both immediate and deferred annuities are sensitive to the discount rate used to value future payment streams and assumptions about future mortality rates. This paper illustrates this with respect to annuities that were...

This paper argues that the price-dividend ratio variability is explained in a large proportion by shocks affecting the subjective distribution of capital gain expectations: sentimental discount rate shocks affecting average beliefs explain at least 30\% and disagreement shocks up to 20\% of the...

This research examines the ability of Earnings less Risk-free Interest Charge (ERIC) to predict stock returns. We find that that earnings, cash flow, and total income are more strongly associated with stock returns than ERIC or residual income. In conclusion, our research suggests that mandatory...

Despite the intuition that risk preferences affect intertemporal choice because the future is uncertain, time discounting is commonly regarded as a reflection of impatience. This interpretation of time discounting rests on the assumption that risk preferences are fully controlled for in the...

In this paper, I examine the heterogeneous exposure of USD-denomination bonds (dollar bonds) to exchange rate risks. An appreciation of the US dollar increases the credit spread differential, referred to as the Foreign Discount, between dollar bonds issued by non-US and US firms. I provide both...

We study the identification of dynamic discrete choice models with hyperbolic discounting using a terminating action. We provide novel identification results for both sophisticated and naive agents’ discount factors and their utilities in a finite horizon framework under the assumption of a...

The Ramsey (1928) equation decomposes the real discount rate into the pure rate of time preference plus a term that accounts for the changing marginal utility of consumption. Discussions about the appropriate discount rate to apply in Cost Benefit Analysis sometimes refer to variations induced...

The appraisal of public investments is subject to formal guidelines which often require input prices, such as forecasted energy prices. Using Danish guidelines as a case study, we explore the discounting assumptions in these input prices and find rates ranging from 2.97% to 17.5%, markedly...

We develop a model to examine how discount rates affect the nature and composition of innovation within an industry. Challenging conventional wisdom, we show that higher discount rates do not discourage firm innovation when accounting for the industry equilibrium. Higher discount rates deter...

When expected returns are linear in asset characteristics, the stochastic discount factor (SDF) that prices individual stocks can be represented as a factor model with GLS cross-sectional regression slope factors. Factors constructed heuristically by aggregating individual stocks into...

This project analyzes how a principal can motivate an agent to conserve rather than exploit a depletable resource. This dynamic problem is relevant for tropical deforestation as well as for other environmental problems. It is shown that the smaller is the agent's discount factor (e.g., because...

Volumes of oil reserves are important indicators of energy availability in the future since it is still the world’s main source of energy. In this paper, we estimate the oil reserve volume under oil price uncertainty using the traditional discounted cash flow (DCF) and the real options theory...

According to the log-linear return approximation, the ability of a predictor to predict future stock returns may arise from its ability to predict either the cash flows or the discount rates, or both. This paper introduces novel nonparametric approaches for estimating and testing the time...

Per the National Academy of Sciences’ 2017 recommendations, the social cost of carbon (SCC) is now calculated with a modular framework in which researchers can easily substitute different models for estimating climate damages. The modular approach is an improvement from previous practice, but...

In many practical settings, learning algorithms can take a substantial amount of time to converge, thereby raising the need to understand the role of discounting in learning. We illustrate the impact of discounting on the performance of learning algorithms by examining two classic and...

This paper studies the implied rate of return, in particular during COVID-19 to see whether and how it is affected by firms’ resilience. The research investigates the cross-sectional heterogeneity in discount rates based on resilience. Specifically, the novelty of the paper is to provide...

We consider a neoclassical growth model with quasi-hyperbolic discounting under Kantian optimization: each temporal self acts in a way that they would like every future self to act. We introduce the notion of a Kantian policy as an outcome of Kantian optimization in a given class of policies. We...

Energy system and power market models refrain from distinguishing between private and social discount rates. We devise a strategy to account for diverging private and social discount rates in intertemporal optimization frameworks, resulting in an optimal carbon tax above the marginal damage when...

We study the role of expectations of naive agents in a general equilibrium version of the Ramsey model with quasi-hyperbolic discounting. When agents recognize others' naivete, as strongly suggested by empirical evidence, they revise consumption paths, correctly anticipating prices in a...

We explore intertemporal decision-making in later life by looking at temporal preference heterogeneity among older individuals. Using choice tasks responses from Poland collected as part of the Survey of Health, Ageing, and Retirement in Europe (SHARE), we elicit individual time preferences...

We revisit the hypothesis that cyclical fluctuations in unemployment are caused by shocks to the discount rate. We use a rich search-theoretic model of the labor market in which the UE, EU and EE rates are all endogenous. Analytically, we show that an increase in the discount rate lowers the UE...

Estimates of the parameters of the quasi-hyperbolic discounting model–beta and delta–have been used for quantitative purposes, including comparisons of the psychology of discounting between populations and decision-making contexts, design of optimal regulation, and adjustment of benefits in...

I derive a simple closed-form formula for the optimal tax on addictive goods when consumers with hyperbolic time preferences erroneously and naïvely believe that they will go through with the consumption plan they devise in the present. In the literature, this problem is well studied for...

The finance literature has documented a number of timing strategies that obtain superior Sharpe ratios and alphas relative to underlying buy-and-hold portfolios by employing simple calendar- or indicator-based weighting schemes. I document a novel fact regarding such timing strategies: the...

Long-duration public bonds denominated in local currency have been traded with liquidity in Brazil since the late 2000s. I use the twelve years or so of now available data to study bond risk premia. As previously documented for the US, a single tent-shaped combination of forward rates predicts...