Endogenous discounting, investment and asset pricing

Niu, Y; Zhao, S; Zou, Z

Endogenous discounting, investment and asset pricing

Niu, Y Zhao, S Zou, Z

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Publisher:: Wiley
Publication Type:: Journal Article
Citation:: International Journal of Finance and Economics, 2023, 28, (1), pp. 644-650
Issue Date:: 2023-01-01

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Field	Value	Language
dc.contributor.author	Niu, Y
dc.contributor.author	Zhao, S
dc.contributor.author	Zou, Z
dc.date.accessioned	2024-04-25T00:52:37Z
dc.date.available	2024-04-25T00:52:37Z
dc.date.issued	2023-01-01
dc.identifier.citation	International Journal of Finance and Economics, 2023, 28, (1), pp. 644-650
dc.identifier.issn	1076-9307
dc.identifier.issn	1099-1158
dc.identifier.uri	http://hdl.handle.net/10453/178356
dc.description.abstract	We extend an equilibrium business cycle/asset pricing model of production and capital accumulation by introducing wealth-dependent time preferences. First, we find that the aggregate consumption is no longer proportional to the output and the consumption volatility is always lower than the volatility of output. Second, the expected real growth rate is increasing in the capital stock, which leads to a twin-peak shape of the world wealth distribution as shown in the data. With respect to financial markets, we show that the equity risk premium is reduced by the endogenous discounting and exhibits a cyclical pattern, which depends on the capital stock. Finally, time-varying discount rate leads to welfare improvement and the welfare gain is decreasing in the capital stock.
dc.language	en
dc.publisher	Wiley
dc.relation.ispartof	International Journal of Finance and Economics
dc.relation.isbasedon	10.1002/ijfe.2441
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1502 Banking, Finance and Investment
dc.subject.classification	Economics
dc.subject.classification	3501 Accounting, auditing and accountability
dc.subject.classification	3502 Banking, finance and investment
dc.title	Endogenous discounting, investment and asset pricing
dc.type	Journal Article
utslib.citation.volume	28
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access	*
pubs.consider-herdc	false
dc.date.updated	2024-04-25T00:52:36Z
pubs.issue	1
pubs.publication-status	Published
pubs.volume	28
utslib.citation.issue	1

Abstract:

We extend an equilibrium business cycle/asset pricing model of production and capital accumulation by introducing wealth-dependent time preferences. First, we find that the aggregate consumption is no longer proportional to the output and the consumption volatility is always lower than the volatility of output. Second, the expected real growth rate is increasing in the capital stock, which leads to a twin-peak shape of the world wealth distribution as shown in the data. With respect to financial markets, we show that the equity risk premium is reduced by the endogenous discounting and exhibits a cyclical pattern, which depends on the capital stock. Finally, time-varying discount rate leads to welfare improvement and the welfare gain is decreasing in the capital stock.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/178356