scholarly journals Long-Term Discount Rates Do Not Vary Across Firms

2018 ◽  
Author(s):  
Matti Keloharju ◽  
Juhani T. Linnainmaa ◽  
Peter M. Nyberg
Keyword(s):  
Discount Rates

A Theory of the Decreasing Term Structure of Discount Rates

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Economic Growth ◽  
Random Walk ◽  
Term Structure ◽  
Stochastic Models ◽  
Driving Force ◽  
Parametric Uncertainty ◽  
Statistical Dependence ◽  
Discount Rates ◽  
Individual Preferences

This chapter aims to provide a unified theoretical foundation to the term structure of discount rates. To do this the chapter develops a benchmark model based on two assumptions: individual preferences toward risk, and the nature of the uncertainty over economic growth. Previously, it was shown that constant relative risk aversion, combined with a random walk for the growth of log consumption, yields a flat term structure for efficient discount rates. In this chapter, these two assumptions are relaxed by using a stochastic dominance approach. Stochastic models of economic growth with mean-reversion, Markov switches, and parametric uncertainty all exhibit some forms of positive statistical dependence of successive growth rates. Because this tends to magnify the long-term risk, it is the driving force of the decreasing nature of the term structure.

Social thinking capital: Individual discount ratewhen contributing to merit and public goods

2020 ◽  
pp. 47-68
Author(s):  
V. V. Karacharovskiy
Keyword(s):  
Public Goods ◽  
Social Bonds ◽  
Discount Rates ◽  
Mass Survey ◽  
Investment Projects ◽  
Social Thinking ◽  
The Social

The hypothesis of declining individual discount rates for socially significant investments as compared to the rates for socially neutral ones confirmed based on a mass survey with using hypothetical situations on investing by the individuals the lottery prize to long-term social bonds. It is shown that there exists a special type of asset in the form of additional part of capital advanced to investment projects which arises for socially significant projects from the fact that people are ready to vote for their financing at a lower rate. The conclusions are drawn about the value of the considered type of asset for the case of Russia, the social base through which it can be accumulated and its differences for merit and public goods of various types. The study was conducted on the basis of a Russian national quota sample.

Discount Rates and Environmental Conservation

1975 ◽  
Vol 2 (3) ◽  
pp. 199-201 ◽  
Author(s):  
D. R. Helliwell
Keyword(s):  
Agricultural Land ◽  
Environmental Conservation ◽  
Discount Rates ◽  
Alternative Method ◽  
Investment Income ◽  
Lending Rates

The use of current money-lending rates as the basis for economic calculations involving long-term assets such as growing timber, agricultural land, or species of wildlife, is unrealistic and can be very damaging to the interests of the environment. An alternative method, using an assessment of risks together with an assessment of the expected ratio of investment: income, is proposed.

scholarly journals Decision making does not benefit from using a foreign language: Evidence from cognitive reflection effects on intertemporal choice.

2020 ◽  
Author(s):  
Michal Bialek ◽  
Artur Domurat ◽  
Mariola Paruzel-Czachura ◽  
Rafal Muda
Keyword(s):  
Decision Making ◽  
Foreign Language ◽  
Decision Maker ◽  
Intertemporal Choice ◽  
Reference Points ◽  
Discount Rates ◽  
Negative Effects ◽  
Cognitive Reflection ◽  
Intertemporal Choices

Intertemporal choice requires to decide between smaller sooner and larger later payoffs, and is captured by discount rates. Across two preregistered experiments we found no evidence that using a foreign language benefitted intertemporal choices. On the contrary, there was some evidence of stronger discounting when a foreign language was used. Our results confirm that more reflective individuals tend to discount less strongly, and their intertemporal choices are also more consistent across different reference points and perspectives. In turn, this allows for greater consistency in long-term planning, benefitting a decision maker. Thinking in a foreign language did not affect such consistency, and may actually have negative effects for reflective people. Finally, although our findings hint that the benefits of cognitive reflection may be reduced when using a foreign language. This raises the questions as to why and how using a foreign language helps only some individuals, and in some decisions.

scholarly journals The Dilemmas of Public Vs. Private Goods Discounting for Long-Term Investment Appraisal: The Puzzle of Citizen and Consumer Approaches to Valuation

2020 ◽  
Vol 20 (2) ◽  
pp. 114-133
Author(s):  
Monika Foltyn-Zarychta
Keyword(s):  
Discount Rate ◽  
Contingent Valuation Method ◽  
Discount Rates ◽  
Public And Private ◽  
Private Goods ◽  
Explanatory Variables ◽  
Investment Appraisal ◽  
Intertemporal Preferences ◽  
Use Values

Abstract Research background: An investment appraisal applies a single discount rate across all effects. However, this may be insufficient for heterogenous environmental impacts, mixing private and public goods as well as use and non-use values, where individuals may have multiple intertemporal preferences due to their duality to act as consumer or citizen. Purpose: The paper aims at identifying the scope of discrepancies in the level of discount rate for public and private as well as use-and non-use investment gains. Research methodology: The contingent valuation method is used to elicit stated discount rates for 2 hypothetical investments: environmental or financial gains to distinguish between public and private domain accompanied by two time-frames: short (use values) and long (non-use values). Results: The discount rate for the environment is lower than for money. It is also lower for the long-term horizon in comparison with the short-term perspective. The discrepancies are observed also for explanatory variables in respect to a socio-economic profile and attitude characteristics. Novelty: The paper adds to the discussion on valuation discrepancies between self-interested consumers and socially oriented citizens. The scarcity of previous research examining discount rates for public/private goods as well as the short/long-time horizon make the results relevant for public policy dealing with climate change and environmental protection, providing an insight into individual intertemporal preferences.

Project Valuation: Price Forecasts Bound to Discount Rates

2021 ◽  
Author(s):  
Babak Jafarizadeh ◽  
Reidar B. Bratvold
Keyword(s):  
Cash Flows ◽  
Capital Asset Pricing ◽  
Discount Rates ◽  
Capital Asset ◽  
Risk Premiums ◽  
Asset Pricing Model ◽  
Project Valuation ◽  
Hurdle Rate ◽  
Future Cash Flows

For their appraisals, most companies use discount rates that account for timing and riskiness of projects. Yet, especially for commodity projects, discounting future cash flows is generally at odds with the assumptions in a company’s hurdle rate. With a multitude of technical and market uncertainties, inconsistent assessments lead to biased valuations and poor investment decisions. In this paper, we consider price forecasts and discount rates in an integrated framework. We calibrate the risk premiums in a two-factor stochastic price process with a capital asset pricing model-based discount rate. Together with the analysts’ long-term prices forecasts, the suggested method improves consistency in valuation and decision making.

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