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Measuring the costs of short-termism

Richard Davies, Andrew Haldane, Mette Nielsen and Silvia Pezzini

Journal of Financial Stability, 2014, vol. 12, issue C, 16-25

Abstract: A potential cost of modern capital markets is short-termism, with agents in the financial intermediation chain weighing near-term outcomes too heavily at the expense of longer-term opportunities and thus forgoing valuable investment projects and potential output. This paper sets out an analytical framework and empirical estimates of the potential costs of short-termism arising from distortions to the cost of capital and investment intentions.

Keywords: Financial economics; Investment (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.jfs.2013.07.002

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