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Indeterminacy in a Forward Looking Regime Switching Model

Farmer, Roger E. A. - 2006

This paper is about the properties of Markov switching rational expectations (MSRE) models. We present a simple monetary policy model that switches between two regimes with known transition probabilities. The first regime, treated in isolation, has a unique determinate rational expectations...

Persistent link: https://www.econbiz.de/10012779321

What Drives the Disposition Effect? An Analysis of a Long-Standing Preference-Based Explanation

Barberis, Nicholas - 2006

explanation for this puzzle is based on prospect theory. Despite its prominence, this explanation has received little formal … scrutiny. We take up this task, and analyze the trading behavior of investors with prospect theory preferences. We find that …, at least for the simplest implementation of prospect theory, the link between these preferences and the disposition …

Persistent link: https://www.econbiz.de/10012779644

Evaluating Welfare with Nonlinear Prices

Reiss, Peter C. - 2006

This paper examines how to evaluate consumer welfare when consumers face nonlinear prices. This problem arises in many settings, such as devising optimal pricing strategies for firms, assessing how price discrimination affects consumers, and evaluating the efficiency costs of many transfer...

Persistent link: https://www.econbiz.de/10012779746

Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth

Fullerton, Don; Kim, Seung-Rae - 2021

Recent studies consider public R&D spending that affects abatement knowledge and endogenous growth, distortionary taxes that affect physical and human capital formation, pollution taxes that affect environmental degradation, and regeneration that restores natural capital. Our model combines all...

Persistent link: https://www.econbiz.de/10013222070

Capital Budgeting vs. Market Timing : An Evaluation Using Demographics

DellaVigna, Stefano - 2010

An ongoing debate sets capital budgeting against market timing. The primary difficulty in evaluating these theories is finding distinct exogenous proxies for investment opportunities and mispricing. We use demand shifts induced by demographics to address this problem, and hence, provide a more...

Persistent link: https://www.econbiz.de/10013152090

Risk Management : Coordinating Corporate Investment and Financing Policies

Froot, Kenneth - 2010

This paper develops a general framework for analyzing corporate risk management policies. We begin by observing that if external sources of finance are more costly to corporations than internally generated funds, there will typically be a benefit to hedging: hedging adds value to the extent that...

Persistent link: https://www.econbiz.de/10012763501

Fixed Costs and Long-Lived Investments

House, Christopher L. - 2008

Neoclassical investment models predict that firms should make frequent, small adjustments to their capital stocks. Microeconomic evidence, however, shows just the opposite -- firms make infrequent, large adjustments to their capital stocks. In response, researchers have developed models with...

Persistent link: https://www.econbiz.de/10012769678

Investment and the Cross-Section of Equity Returns

Clementi, Gian Luca - 2015

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

Levered Returns

Welch, Ivo - 2016

Do financial markets properly reflect leverage? Unlike Gomes and Schmid (2010) who examine this question with a structural approach (using long-term monthly stock characteristics), my paper examines it with a quasi-experimental approach (using short-term a discrete event). After a firm has...

Persistent link: https://www.econbiz.de/10012994892

Investment, Depreciation, and Capital Utilization

Bernstein, Jeffrey I.; Nadiri, M. Ishaq - 2021

. Often this problem is ignored in the theory of investment, not only because depreciation is exogenous, but also due to the …

Persistent link: https://www.econbiz.de/10013219962

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