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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/10012466125
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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/10012466268
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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/10012466295
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Financial Constraints, Asset Tangibility, and Corporate Investment
Almeida, Heitor - 2006
between capital spending and cash flows is non-monotonic in the firm's asset tangibility. Our theory allows us to use a …
Persistent link: https://www.econbiz.de/10012466582
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Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth
Fullerton, Don - 2006
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/10012466599
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Capital Budgeting vs. Market Timing : An Evaluation Using Demographics
DellaVigna, Stefano - 2009
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/10012463465
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Rational Capital Budgeting in an Irrational World
Stein, Jeremy C. - 1996
This paper addresses the following basic capital budgeting question: Suppose that cross-sectional differences in stock returns can be predicted based on variables other than beta (e.g., book-to- market), and that this predictability reflects market irrationality rather than compensation for...
Persistent link: https://www.econbiz.de/10012473363
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Modeling Managers As EPS Maximizers
Ben-David, Itzhak; Chinco, Alexander M. - National Bureau of Economic Research - 2023
Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them …
Persistent link: https://www.econbiz.de/10014250143
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Empire-Builders and Shirkers : Investment, Firm Performance, and Managerial Incentives
Aggarwal, Rajesh K. - 1999
Do firms systematically over- or underinvest as a result of agency problems? We develop a contracting model between shareholders and managers in which managers have private benefits or private costs of investment. Managers overinvest when they have private benefits and underinvest when they have...
Persistent link: https://www.econbiz.de/10012471449
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Time to Build, Option Value, and Investment Decisions
Majd, Saman - 1985
Many investment projects have the following characteristics: (i) spending decisions and cash outlays occur sequentially over time, (ii) there is a maximum rate at which outlays and construction can proceed -- it takes "time to build," and (iii) the project yields no cash return until it is...
Persistent link: https://www.econbiz.de/10012477426