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How Much Would You Pay to Resolve Long-Run Risk?
Epstein, Larry G. - 2013
Though risk aversion and the elasticity of intertemporal substitution have been the subjects of careful scrutiny when calibrating preferences, the long-run risks literature as well as the broader literature using recursive utility to address asset pricing puzzles have ignored the full...
Persistent link: https://www.econbiz.de/10013074290
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Rare Disasters and Risk Sharing with Heterogeneous Beliefs
Chen, Hui - 2010
Although the threat of rare economic disasters can have large effect on asset prices, difficulty in inference regarding both their likelihood and severity provides the potential for disagreements among investors. Such disagreements lead investors to insure each other against the types of...
Persistent link: https://www.econbiz.de/10013142936
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An Empirical Assessment of Alternative Models of Risky Decision Making
Baker, Joanna R. - 2010
In this paper, we assess the degree to which four of the most commonly used models of risky decision making can explain … explain the decision-making behavior of the majority of our subjects. Surprisingly, we find that the choice behavior of the … of risky decision making …
Persistent link: https://www.econbiz.de/10013135363
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Inducing Leaders to Take Risky Decisions : Dismissal, Tenure, and Term Limits
Aghion, Philippe - 2014
In this paper we analyze the problem of whether and/or when to replace a leader (agent) when no monetary rewards are available, and it is the leader's competence rather than effort that is being evaluated. The only decisions that the leader takes over time are whether to undertake risky but...
Persistent link: https://www.econbiz.de/10013050303
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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/10012986691
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Preference Parameters and Behavioral Heterogeneity : An Experimental Approach in the Health and Retirement Survey
Barsky, Robert; Kimball, Miles S.; Juster, F. Thomas; … - 2021
Individuals' preferences underlying most economic behavior are likely to display substantial heterogeneity. This paper reports on direct measures of preference parameters relating to risk tolerance, time preference, and intertemporal substitution. These experimental measures are based on survey...
Persistent link: https://www.econbiz.de/10013210685
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Solomonic Separation : Risk Decisions as Productivity Indicators
Miller, Nolan H. - 2012
A principal provides budgets to agents (e.g., divisions of a firm or the principal's children) whose expenditures provide her benefits, either materially or because of altruism. Only agents know their potential to generate benefits. We prove that if the more "productive" agents are also more...
Persistent link: https://www.econbiz.de/10013096139
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Salience Theory of Choice Under Risk
Bordalo, Pedro - 2015
We present a theory of choice among lotteries in which the decision maker's attention is drawn to (precisely defined …) salient payoffs. This leads the decision maker to a context-dependent representation of lotteries in which true probabilities … are replaced by decision weights distorted in favor of salient payoffs. By endogenizing decision weights as a function of …
Persistent link: https://www.econbiz.de/10013038557
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Risk Price Dynamics
Borovička, Jaroslav - 2009
We present a novel approach to depicting asset pricing dynamics by characterizing shock exposures and prices for alternative investment horizons. We quantify the shock exposures in terms of elasticities that measure the impact of a current shock on future cash-flow growth. The elasticities are...
Persistent link: https://www.econbiz.de/10013154476
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An Empirical Evaluation of the Long-Run Risks Model for Asset Prices
Bansal, Ravi - 2009
We provide an empirical evaluation of the forward-looking long-run risks (LRR) model and highlight model differences with the backward-looking habit based asset pricing model. We feature three key results: (i) Consistent with the LRR model, there is considerable evidence in the data of...
Persistent link: https://www.econbiz.de/10013154563