Triumph of the Optimists

Dimson, Elroy; Marsh, Paul; Staunton, Mike

doi:10.1515/9781400829477

Cited by 609 publications

(79 citation statements)

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“…According to Dixit and Pindyck (1994), for the benchmark case we assume r = 0:04 and = 0:20: these values are consistent with the empirical evidence (see, e.g., Jorion and Goetzman, 1999, and Dimson et al, 2002). Moreover, we assume that the depreciation rate is either 0.03 or 0.10.…”

Section: A Numerical Analysissupporting

confidence: 64%

“…7 Assumption 6 describes a simple straight-line …scal depreciation allowance which is granted throughout the investment's lifetime. When the project dies, this deduction vanishes.…”

Section: Assumptionmentioning

confidence: 99%

“…Using dynamic programming, we can write the value of equity as the sum between the after-tax payo¤ received in the interval dt, i.e., N ( ; C) dt, and the 7 For simplicity, we do not account for rules aimed at limiting the deductibility of interest payments. Again, this topic is left for further research.…”

Section: Assumptionmentioning

confidence: 99%

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Accelerated Depreciation, Default Risk and Investment Decisions

Panteghini

Vergalli

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this article we focus on a representative firm that can decide when to invest under default risk. On the one hand, this firm can benefit from generous tax depreciation allowances, on the other hand it faces a default risk. Our aim is to study the effects of tax depreciation allowances in a risky environment. As will be shown in our numerical analysis, generous tax depreciation allowances lead to a decrease in a firm's leverage and, in most cases, cause a reduction in default risk. This result has a strong policy implication, in that it shows that an investment stimulus pack is expected neither to increase the default risk nor to cause financial instability. Terms of use: Documents in EconStor mayJEL-codes: H200.

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Section: A Numerical Analysissupporting

confidence: 64%

“…7 Assumption 6 describes a simple straight-line …scal depreciation allowance which is granted throughout the investment's lifetime. When the project dies, this deduction vanishes.…”

Section: Assumptionmentioning

confidence: 99%

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Accelerated Depreciation, Default Risk and Investment Decisions

Panteghini

Vergalli

2016

SSRN Journal

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“…24. A controversial paradox in the field of demography stems from the fact that economic growth seems to be unrelated to the performance of financial markets (see, among many others, Dimson, Marsh, and Staunton 2002). Our study may help resolve this paradox.…”

confidence: 83%

Demographic Changes, Financial Markets, and the Economy

Arnott¹,

Chaves²

2012

Financial Analysts Journal

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Using a large sample of countries and 60 years of data, the authors found a strong and intuitive link between demographic transitions and both GDP growth and capital market returns. Unlike previous researchers, who used ad hoc and restrictive demographic variables, the authors imposed a smooth and parsimonious polynomial curve across all age groups. They also performed robustness checks and produced forecasts for the coming decade, with all the necessary caveats.Demography is destiny. -Auguste Comte (1798-1857 emography is one of the rare social sciences in which forecasts-at least for the short run-have startlingly little uncertainty. Today's 40-year-olds are next year's 41-year-olds. We can count them; we know the likely mortality for 40-year-olds and the likely rate of immigration and emigration for this age cadre. Looking 10 years into the future, we can see some uncertainty in the number of people under 10 and in the number of people over 70 (depending on the progress of medical science), but surprisingly little uncertainty in the number of people aged 10-70-barring war, pestilence, or other catastrophes. As the Baby Boomers have aged, many researchers have studied past demographic data in an effort to extract indications of the future influence of Boomers on various aspects of the economy, from housing prices to consumer preferences to retirement plans.Although the genesis of our study has the same roots-curiosity about the potential impact of aging Baby Boomers-we decided to pursue a broader course of study that spans decades of data and dozens of countries. We concentrated on three areas in which demographic shifts might influence the economy: real per capita GDP growth, stock market returns, and bond market returns.We strove not to extend the theoretical relationships between demographic changes and financial markets or the economy but, rather, to apply new empirical techniques. First, we sought to extract more statistical significance by looking at data from many countries over many years. Second, instead of fitting regressions against broad and ad hoc demographic cohorts, we fit polynomials to the regression coefficients between demographic age groups and both GDP growth and stock and bond returns. The use of polynomials is intuitive because it satisfies two important criteria: parsimony (only a small number of parameters are required) and continuity across age groups (behavior should change reasonably smoothly from one age cadre to the next).Two core principles influenced our research design. First, we deemed models for GDP growth less interesting than models for real per capita PPPadjusted GDP growth. 1 All three of these modifiers of GDP growth are important. After all, in a country with 3 percent population growth, 3 percent GDP growth means no growth at all for the average citizen-hence, our reliance on per capita data. The same logic holds for 10 percent per capita GDP growth in a country with 10 percent inflationthus, our focus on real per capita GDP growth. The PPP adjustment creates a fairer ...

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“…The historical returns have provided an insight to the equity risk premium (See Table 3.1). The empirical research done by Dimson (2002) calculated the equity market risk premium for sixteen countries over a 102-year period from 1900-2001 , and showed risk-premiums relative to risk-free assets are substantial.…”

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confidence: 99%

Risk-reward of exchange traded funds: a study of Canadian ETF's

Overennay¹

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The study found the best performing ETFs were international funds especially emerging market funds which witnessed high growth rates in the last decade (especially BRIC countries). Currency-hedged funds also performed relatively better reflecting the role of exchange rates in impacting the returns of cross-border investments. Commodity ETFs generally had shown mixed results: the bear commodity ETFs (reflecting the macro-economic performance) generally did well as compared to bull commodity ETFs.In terms of risk-reward, the results are somewhat different. International and emerging market ETFs performed well in terms of positive and high alphas (excess returns) but also had displayed relatively high risk. In terms of risk-reward, the Canadian and US broad equity ETFs performed well (Treynor ratio of 0.11) while fixed income ETFs had the lowest Treynor ratio (-2.05). In terms of ranking, the currency-hedged ETFs performed relatively better than Canadian sector ETFs. The international and emerging market funds while displaying positive Treynor ratios (risk-reward) were the ETFs with relatively modest performance. Ill !TABLE OF CONTENTS

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Triumph of the Optimists

Cited by 609 publications

References 1 publication

Accelerated Depreciation, Default Risk and Investment Decisions

Accelerated Depreciation, Default Risk and Investment Decisions

Demographic Changes, Financial Markets, and the Economy

Risk-reward of exchange traded funds: a study of Canadian ETF's

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