Diminishing marginal impatience: its promises for asset pricing
نویسندگان
چکیده
This study argues that diminishing marginal impatience (DMI ) as an intuitively plausible behavioural assumption of endogenous time preference has the potential for resolving important issues like the equity premium puzzle. It shows that, while applied to a model in the traditional overlapping generations (OG) framework, DMI is capable of generating assets prices with magnitude and volatility higher than those suggested by standard models with constant marginal impatience (CMI ).
منابع مشابه
An Experimental Test of the Lucas Asset Pricing Model
We implement a dynamic asset pricing experiment in the spirit of Lucas (1978) with storable assets and non-storable cash. In one treatment we impose diminishing marginal returns to cash to incentivize consumption-smoothing across periods, while in a second treatment there is no induced motive for trade. In the former case we find that subjects use the asset to smooth consumption though the asse...
متن کاملDiminishing Impatience: Disentangling Time Preference from Uncertain Lifetime
A decision maker with time consistent preferences may exhibit diminishing impatience, when uncertain lifetime is accounted for. Uncertain lifetime captures not only the risk of mortality, but also the possibility that a promise for a delayed reward might be breached, or a postponed consumption might not be realized. The restrictions that time consistency imposes on additive intertemporal prefer...
متن کاملDecreasing Marginal Impatience in a Monetary Growth Model
Unlike the standard assumption that the degree of impatience, measured by the rate of time preference, is increasing in wealth, empirical studies support that impatience is marginally decreasing. By introducing decreasing marginal impatience into the neoclassical monetary growth model á la Sidrauski, we show that (i) consistently with empirical results, an increase in the core rate of inflation...
متن کاملExamination of Equity Premium Puzzle by Consumption Capital Asset Pricing Model with Fuzzy Nested Regimes: Evidence from Iran
The aim of this study is to examine the equity premium puzzle in Iran for the quarterly period of 1993-2016. In this regard, the hybrid bivariate Garch model and also fuzzy dummy variables with consumption capital asset pricing model (C-CAPM) have been used. The results of study show that using C-CAPM within fuzzy dummy variables (CCAPM-F), the relative risk aversion coefficient of investor is ...
متن کاملAssessing the Financial Performance of Forestry-Related Investment Vehicles: Capital Asset Pricing Model vs. Arbitrage Pricing Theory
Capital asset pricing model (CAPM) and arbitrage pricing theory (APT) are used to assess the financial performance of eight forestry-related investment vehicles.Although results from APT support previous findings from CAPM about timberland investments, three bodies of evidence show that APT findings are more robust. The major conclusions are (a) institutional timberland investments and timberla...
متن کامل