Abstract
This thesis which compromise of three essays focuses on the theme of
valuation, value premium anomaly, financing behaviour and emerging
markets. The first essay studies the value growth puzzle in the context of
conflict of interest between taxable and institutional investors. We model this
conflict in a rational expectations framework and demonstrate how the
differences in firm's characteristics (in terms of value versus growth) and the
risk profile of the investors can explain the shape of CAPM's frontier in the
overall economy without involving the beta parameter. We also explicate
that the changes in taxable and non-taxable investors profile in a dynamic
environment rationalize the value growth premium as illustrated by Malkiel
(2003). Finally, our approach shed light on the issues raised by Shiller
(1979,1981) and LeRoy and Porter (1981) that stock [bond] prices are too
volatile to be rationalized by the discounted value of their expected dividends
[coupon payments].
valuation, value premium anomaly, financing behaviour and emerging
markets. The first essay studies the value growth puzzle in the context of
conflict of interest between taxable and institutional investors. We model this
conflict in a rational expectations framework and demonstrate how the
differences in firm's characteristics (in terms of value versus growth) and the
risk profile of the investors can explain the shape of CAPM's frontier in the
overall economy without involving the beta parameter. We also explicate
that the changes in taxable and non-taxable investors profile in a dynamic
environment rationalize the value growth premium as illustrated by Malkiel
(2003). Finally, our approach shed light on the issues raised by Shiller
(1979,1981) and LeRoy and Porter (1981) that stock [bond] prices are too
volatile to be rationalized by the discounted value of their expected dividends
[coupon payments].
| Original language | English |
|---|---|
| Publication status | Published - 2012 |
| Externally published | Yes |