abstract: In the first chapter, I develop a representative agent model in which the purchase of consumption goods must be planned in advance. Volatility in the agent's portfolio increases the risk that a purchase cannot be implemented. This implementation risk causes the agent to make conservative consumption plans. In the model, this leads to persistent and negatively skewed consumption growth and a slow reaction of consumption to wealth shocks. The model proposes a novel explanation for the negative relation between volatility and expected utility. In equilibrium, prices of risky assets must compensate for the utility loss. Hence, the model suggests a new mechanism for generating the equity risk premium. Importantly, because implementation risk does not rely on the co-movement of asset prices with marginal utility, the resulting equity premium does not require concavity of the intratemporal utility function.
In the second chapter, I challenge the view that equity market timing always benefits
shareholders. By distinguishing the effect of a firm's equity decisions from the effect of mispricing itself, I show that market timing can decrease shareholder value. Additionally, the timing of equity sales has a more negative effect on existing shareholders than the timing of share repurchases. My theory can be used to infer firms' maximization objectives from their observed market timing strategies. I argue that the popularity of stock buybacks, the low frequency of seasoned equity offerings, and the observed post-event stock returns are consistent with managers maximizing current shareholder value. / Dissertation/Thesis / Doctoral Dissertation Business Administration 2015
| Identifer | oai:union.ndltd.org:asu.edu/item:29718 |
| Date | January 2015 |
| Contributors | Wan, Pengcheng (Author), Boguth, Oliver (Advisor), Tserlukevich, Yuri (Advisor), Babenka, Ilona (Committee member), Arizona State University (Publisher) |
| Source Sets | Arizona State University |
| Language | English |
| Detected Language | English |
| Type | Doctoral Dissertation |
| Format | 127 pages |
| Rights | http://rightsstatements.org/vocab/InC/1.0/, All Rights Reserved |
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