| 来源类型 | Discussion paper
|
| 规范类型 | 论文
|
| 来源ID | DP16007
|
| DP16007 The welfare cost of ignoring the beta |
| Christian Gollier
|
| 发表日期 | 2021-04-04
|
| 出版年 | 2021
|
| 语种 | 英语
|
| 摘要 | Because of risk aversion, any sensible investment valuation system should value less projects that contribute more to the aggregate risk, i.e., that have a larger income-elasticity of net benefits. In theory, this is done by adjusting discount rates to consumption betas. But in reality, for various reasons (Arrow-Lind and WACC fallacies, market failures), most public and private institutions and people use a discount rate that is rather insensitive to the risk profile of their investment projects. I show in this paper that the economic consequences of the implied misallocation of capital are dire. To do this, I calibrate a Lucas model in which the investment opportunity set contains a myriad of projects with different expected returns and risk profiles. The welfare loss of using a single discount rate is equivalent to a permanent reduction in consumption that lies somewhere between 15% and 45%, depending upon which familiar discounting system is used. Economists should devote more energy to support a reform of public discounting systems in favor of what has been advocated by the normative interpretation of modern asset pricing theories over the last four decades. |
| 主题 | Public Economics
|
| 关键词 | Discounting
Investment theory
Asset pricing
Carbon pricing
Arrow-lind theorem
Wacc fallacy
Rare disasters
Capital budgeting
|
| URL | https://cepr.org/publications/dp16007
|
| 来源智库 | Centre for Economic Policy Research (United Kingdom)
|
| 资源类型 | 智库出版物
|
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/544990
|
推荐引用方式
GB/T 7714 |
Christian Gollier. DP16007 The welfare cost of ignoring the beta. 2021.
|
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