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Wage Dynamics and Unobserved Heterogeneity : Time Preference of Learning Ability?
Munasinghe, Lalith; Sicherman, Nachum - 2021
sources of heterogeneity (both of which can clearly account for the variation in wages and wage growth rates): learning … ability and workers' inter-temporal preferences (discounting). We apply this test to the large observed differences in wages … and wage growth rates between smokers and non-smokers. The evidence supports the discounting hypothesis …
Persistent link: https://www.econbiz.de/10013215374
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Identification and Inference in Linear Stochastic Discount Factor Models with Excess Returns
Burnside, A. Craig - 2010
When excess returns are used to estimate linear stochastic discount factor (SDF) models, researchers often adopt a normalization of the SDF that sets its mean to 1, or one that sets its intercept to 1. These normalizations are often treated as equivalent, but they are subtly different both in...
Persistent link: https://www.econbiz.de/10013134862
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Risk Preferences are Not Time Preferences : Discounted Expected Utility with a Disproportionate Preference for Certainty
Andreoni, James - 2010
Risk and time are intertwined. The present is known while the future is inherently risky. Discounted expected utility provides a simple, coherent structure for analyzing decisions in intertemporal, uncertain environments. However, we document robust violations of discounted expected utility,...
Persistent link: https://www.econbiz.de/10013138320
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Discount Rates
Cochrane, John H. - 2011
Discount rate variation is the central organizing question of current asset pricing research. I survey facts, theories and applications. We thought returns were uncorrelated over time, so variation in price-dividend ratios was due to variation in expected cashflows. Now it seems all...
Persistent link: https://www.econbiz.de/10013126211
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The Inefficient Markets Hypothesis : Why Financial Markets Do Not Work Well in the Real World
Farmer, Roger E. A. - 2012
Existing literature continues to be unable to offer a convincing explanation for the volatility of the stochastic discount factor in real world data. Our work provides such an explanation. We do not rely on frictions, market in completeness or transactions costs of any kind. Instead, we modify a...
Persistent link: https://www.econbiz.de/10013096129
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Rare Disasters, Tail-Hedged Investments, and Risk-Adjusted Discount Rates
Weitzman, Martin - 2012
to the riskfree rate alone. Some simple numerical examples are given. Implications are noted for discounting long …
Persistent link: https://www.econbiz.de/10013098814
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The Choice of Discount Rate for Climate Change Policy Evaluation
Goulder, Lawrence H. - 2012
Nearly all discussions about the appropriate consumption discount rate for climate-change policy evaluation assume that a single discount rate concept applies. We argue that two distinct concepts and associated rates apply. We distinguish a social-welfare-equivalent discount rate appropriate for...
Persistent link: https://www.econbiz.de/10013101826
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Econometric Analysis of Present Value Models When the Discount Factor is Near One
West, Kenneth D. - 2012
This paper develops asymptotic econometric theory to help understand data generated by a present value model with a discount factor near one. A leading application is to exchange rate models. A key assumption of the asymptotic theory is that the discount factor approaches 1 as the sample size...
Persistent link: https://www.econbiz.de/10013103507
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The Ramsey Discounting Formula for a Hidden-State Stochastic Growth Process
Weitzman, Martin - 2012
discount rate. The components of this hidden-state Ramsey discounting formula are then analyzed, followed by a few remarks …
Persistent link: https://www.econbiz.de/10013104998
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Market Valuation of Accrued Social Security Benefits
Geanakoplos, John - 2009
One measure of the health of the Social Security system is the difference between the market value of the trust fund and the present value of benefits accrued to date. How should present values be computed for this calculation in light of future uncertainties? We think it is important to use...
Persistent link: https://www.econbiz.de/10013157914