Martin, Ian (2012) On the valuation of long-dated assets. Journal of Political Economy, 120 (2). pp. 346-358. ISSN 0022-3808
I show that the pricing of a broad class of long-dated assets is driven by the possibility of extraordinarily bad news. This result does not depend on any assumptions about the existence of disasters, nor does it apply only to assets that hedge bad outcomes; indeed, it applies even to long-dated claims on the market in a lognormal world if the market’s Sharpe ratio is higher than its volatility, as appears to be the case in practice.
|Additional Information:||© 2012 by The University of Chicago|
|Library of Congress subject classification:||H Social Sciences > HG Finance|
|Sets:||Departments > Finance|
|Date Deposited:||22 Apr 2013 08:45|
Actions (login required)
|Record administration - authorised staff only|