Three essays in finance: Demographics and the equity premium; Capital budgeting and compensation with asymmetric information and moral hazard; Risk sharing, welfare and a new security

详细信息   

• 作者：Luo ; Jiang
• 学历：Doctor
• 年：2001
• 关键词：Social sciences ; Finance ; Budgeting ; Compensation ; Sha
• 导师：Brennan,Michael J
• 毕业院校：University of California
• 专业：Finance;Dividends;Studies;Demographics;Stock prices;Capital;Budgeting
• ISBN：9780493360966,0493360964
• CBH：3024080
• Country：USA
• 语种：English
• FileSize：7143574
• Pages：176

文摘

Chapter 1 studies the relation between demographics and the equity premium in a dynamic overlapping generations (OLG) equilibrium model. Investors have labor and investment income. The labor income and the dividend processes are correlated. Investors trade stocks for consumption purposes and to hedge against the risk of their labor income. The per capita stock supply is normalized to unity,and the demographic structure is time varying. In equilibrium,the equity premium is linear in the market value per capita,the dividend yield and the dividend payout ratio,but the coefficients of the linear relation are time varying because of demographic change. Proxying the coefficients by linear functions of the change in the share of population in the age range 40-64,we derive a non-linear predictive regression for the equity premium,which is not only significant in the empirical tests using post-1947 data but also improves significantly on previous predictive relations. Chapter 2 consider optimal capital allocation and managerial compensation mechanisms for decentralized firms when division managers have an incentive to misrepresent project quality and to minimize privately costly but value-enhancing effort. We show that in the optimal mechanism firms always underinvest in capital relative to a naive application of the net present value (NPV) rule. We make a number of novel cross-sectional predictions about the severity of the underinvestment problem and the composition of managerial compensation contracts. We also find that firms will optimally give greater performance-based pay (at the expense of fixed wages) to managers of higher quality projects to mitigate the incentive for managers to overstate project quality. Managers may thus receive greater performance-based pay because they manage higher quality projects,not that greater performance-based pay causes firm value to increase. Chapter 3 develops an OLG model and uses it to study the effects on the stock market and investor welfare of introducing dividend strips on the S&P 500 Index. Dividend strips are claim to a year's dividend on the index and were proposed by Brennan (1998). A market in dividend strips induces a shift of risk from old investors to young investors. Since young investors are more risk tolerant,this improves risk sharing,and therefore investor welfare. We also find that introducing dividend strips would lower the equity premium and stock price volatility.