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On the Welfare Costs of Consumption Uncertainty

Barro, Robert J. - 2006

Satisfactory calculations of the welfare cost of aggregate consumption uncertainty require a framework that replicates major features of asset prices and returns, such as the high equity premium and low risk-free rate. A Lucas-tree model with rare but large disasters is such a framework. In a...

Persistent link: https://www.econbiz.de/10012465898

Buyout Activity : The Impact of Aggregate Discount Rates

Haddad, Valentin - 2016

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/10012456263

Memory and Representativeness

Bordalo, Pedro - 2019

We explore the idea that judgment by representativeness reflects the workings of episodic memory, especially interference. In a new laboratory experiment on cued recall, participants are shown two groups of images with different distributions of colors. We find that i) decreasing the frequency...

Persistent link: https://www.econbiz.de/10012479623

Investment Tournaments : When Should a Rational Agent Put All Eggs in One Basket?

Schwarz, Michael - 2009

In this paper we study "investment tournaments," a class of decision problems that involve gradual allocation of … investment among several alternatives whose values are subject to exogenous shocks. The decision-maker's payoff is determined by … broad range of cases it is optimal for the decision-maker in each time period to allocate all resources to the most …

Persistent link: https://www.econbiz.de/10012463514

Deterministic and Stochastic Prisoner's Dilemma Games : Experiments in Interdependent Security

Kunreuther, Howard - 2007

This paper examines experiments on interdependent security prisoner's dilemma games with repeated play. By utilizing a Bayesian hierarchical model, we examine how subjects make investment decisions as a function of their previous experience and their treatment condition. Our main findings are...

Persistent link: https://www.econbiz.de/10012465365

The Influence Of Probability on Risky Choice : A parametric Examination

Lattimore, Pamela K. - 1992

The appeal of expected utility theory as a basis for a descriptive model of risky decision making has diminished is a … parametric model of risky decision making. Our results suggest that models which provide for probability transformations are most …

Persistent link: https://www.econbiz.de/10012474843

Incentivizing Calculated Risk-Taking : Evidence from an Experiment with Commercial Bank Loan Officers

Cole, Shawn - 2013

We use an experiment with commercial bank loan officers to test how performance based compensation affects risk-assessment and lending. High-powered incentives lead to greater screening effort and more profitable lending decisions. This effect, however, is muted by deferred compensation and...

Persistent link: https://www.econbiz.de/10012459190

Evolution of Risk Aversion over Five Years after a Major Natural Disaster

Ingwersen, Nicholas; Frankenberg, Elizabeth; Thomas, Duncan - National Bureau of Economic Research - 2023

The impact of exposure to a major unanticipated natural disaster on the evolution of survivors' attitudes toward risk is examined, exploiting plausibly exogenous variation in exposure to the 2004 Indian Ocean tsunami in combination with rich population-representative longitudinal survey data...

Persistent link: https://www.econbiz.de/10014250120

One Size Doesn't Fit All : Heterogeneous Depositor Compensation During Periods of Uncertainty

Artavanis, Nikolaos; Paravisini, Daniel; Robles-Garcia, … - National Bureau of Economic Research - 2022

We develop a new approach to identify different categories of depositors during periods of uncertainty and quantify their compensation to remain in the bank. We isolate withdrawals due to liquidity needs, deterioration of fundamentals, and expectation about withdrawal behavior of other...

Persistent link: https://www.econbiz.de/10013362023

Investor Protection and Corporate Valuation

Porta, Rafael La - 1999

We present a model of the effects of legal protection of minority shareholders and of cash flow ownership by a controlling shareholder on the valuation of firms. We then test this model using a sample of 371 large firms from 27 wealthy economies. Consistent with the model, we find evidence of...

Persistent link: https://www.econbiz.de/10012471382