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Short-Term Contracts as a Monitoring Device
Rey, Patrick; Stiglitz, Joseph E. - 2021
This paper focuses on two separate problems. The first is that frequently, the most profitable use of funds involves long-term investments, which militiates for long-term debt contracts. The second problem is to monitor the investor's use of funds, as exemplified by the U.S. S&L saga, and we...
Persistent link: https://www.econbiz.de/10013230189
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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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Depression Babies : Do Macroeconomic Experiences Affect Risk-Taking?
Malmendier, Ulrike - 2010
We investigate whether individuals' experiences of macro-economic outcomes have long-term effects on their risk attitudes, as often suggested for the generation that experienced the Great Depression. Using data from the Survey of Consumer Finances from 1964-2004, we find that individuals who...
Persistent link: https://www.econbiz.de/10012757672
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Portfolio Rebalancing in General Equilibrium
Kimball, Miles S. - 2018
This paper develops an overlapping generations model of optimal rebalancing where agents differ in age and risk tolerance. Equilibrium rebalancing is driven by a leverage effect that influences levered and unlevered agents in opposite directions, an aggregate risk tolerance effect that depends...
Persistent link: https://www.econbiz.de/10012916605
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The Burden of the Nondiversifiable Risk of Entrepreneurship
Hall, Robert E. - 2014
In the standard venture capital contract, entrepreneurs have a large fraction of equity ownership in the companies they … aversion, higher initial assets, preferences for entrepreneurship over employment, and optimistic beliefs about the payoffs …
Persistent link: https://www.econbiz.de/10012751344
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Client-Based Entrepreneurship
Rauch, James E. - 2014
. If when an employer and worker establish a relationship they cannot contract on the output and profits of the worker …'s prospective new firm, the employer counters by inducing the worker to sign a contract that prohibits him from competing or … soliciting the current client in the event of termination of employment. The socially optimal level of entrepreneurship will …
Persistent link: https://www.econbiz.de/10013069964
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Explaining the Favorite-Longshot Bias : Is it Risk-Love or Misperceptions?
Snowberg, Erik - 2010
misperceptions of probability drive the favorite-longshot bias, as suggested by Prospect Theory …
Persistent link: https://www.econbiz.de/10013144509
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Innovative Originality, Profitability, and Stock Returns
Hirshleifer, David A. - 2017
We propose that innovative originality (InnOrig) is a valuable organizational resource, and that owing to limited investor attention and skepticism of complexity, firms with greater InnOrig are undervalued. We find that firms' InnOrig strongly predicts higher, more persistent, and less volatile...
Persistent link: https://www.econbiz.de/10012955455
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Why Do Household Portfolio Shares Rise in Wealth?
Wachter, Jessica A. - 2010
We develop a life-cycle consumption and portfolio choice model in which households have nonhomothetic utility over two types of goods, basic and luxury. We calibrate the model to match the cross-sectional and life-cycle variation in the basic expenditure share in the Consumer Expenditure Survey....
Persistent link: https://www.econbiz.de/10013138766
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Asset Prices and Aggregate Demand in a "Covid-19" Shock : A Model of Endogenous Risk Intolerance and Lsaps
Caballero, Ricardo J. - 2020
In this paper we: (i) provide a model of the endogenous risk intolerance and severe aggregate demand contractions following a large real (non-financial) shock; and (ii) demonstrate the effectiveness of Large Scale Asset Purchases (LSAPs) in addressing these contractions. The key mechanism stems...
Persistent link: https://www.econbiz.de/10012835752