Learning, structural instability and present value calculations

Arbeitspapier

Present value calculations require predictions of cash flows both at near and distant future points in time. Such predictions are generally surrounded by considerable uncertainty and may critically depend on assumptions about parameter values as well as the form and stability of the data generating process underlying the cash flows. This paper presents new theoretical results for the existence of the infinite sum of discounted expected future values under uncertainty about the parameters characterizing the growth rate of the cash flow process. Furthermore, we explore the consequences for present values of relaxing the stability assumption in a way that allows for past and future breaks to the underlying cash flow process. We find that such breaks can lead to considerable changes in present values.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 1650

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Bayesian Analysis: General ; Insurance; Insurance Companies; Actuarial Studies
• Thema: present value ; stock prices ; structural breaks ; Bayesian learning ; Dynamische Investitionsrechnung ; Abzinsung ; Stochastischer Prozess ; Strukturbruch ; Bayes-Statistik ; Wertpapieranalyse ; Schätzung ; Theorie ; USA

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Pesaran, Mohammad Hashem ; Pettenuzzo, Davide ; Timmermann, Allan
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/19114
• Letzte Aktualisierung: 20.09.2024, 08:21 MESZ