Asset Prices and Hyperbolic Discounting

Liutang Gong, William Smith and Heng-Fu Zou ()
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William Smith: Department of Economics, Fogelman College of Business & Economics University of Memphis

No 486, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: This paper explores the implications of hyperbolic discounting for asset prices and rates of return. Hyperbolic discounting has no effect on the equity premium. However, by making people less patient, causes stock prices to be lower, and interest rates higher, than with exponential discounting. In addition, hyperbolic discounting dampens the marginal effect of risk on stock prices, relative to the exponential case.

Keywords: Asset-Pricing; Hyperbolic Discounting (search for similar items in EconPapers)
JEL-codes: D91 E21 G11 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2011
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Citations: View citations in EconPapers (1)

Published in Annals of Economics and Finance, Society for AEF, vol. 8(2), pages 397-414, November.

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http://down.aefweb.net/WorkingPapers/w486.pdf (application/pdf)

Related works:
Journal Article: Asset Prices and Hyperbolic Discounting (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:486

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