Asset Prices and Hyperbolic Discounting

This paper explores the implications of hyperbolic discounting for asset prices and rates of return. Hyperbolic discounting has no effect on the equity premium. However, by making people less patient, causes stock prices to be lower, and interest rates higher, than with exponential discounting. In addition, hyperbolic discounting dampens the marginal effect of risk on stock prices, relative to the exponential case.

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Year of publication:	2011
Authors:	Gong, Liutang ; Smith, William ; Zou, Heng-fu
Institutions:	China Economics and Management Academy, Central University of Finance and Economics (CUFE)
Subject:	Asset-Pricing \| Hyperbolic Discounting

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Extent:	application/pdf
Series:	CEMA Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Published in Annals of Economics and Finance, Society for AEF, vol. 8(2), pages 397-414, November. Number 486 18 pages
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving ; E21 - Consumption; Saving ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009246591