Measuring the Costs of Short-Termism
Posted: 12 Oct 2015
Date Written: July 9, 2013
A potential cost of modern capital markets is short-termism, with agents in the financial intermediation chain weighing near-term outcomes too heavily at the expense of longer-term opportunities and thus forgoing valuable investment projects and potential output. This paper sets out an analytical framework and empirical estimates of the potential costs of short-termism arising from distortions to the cost of capital and investment intentions.
Keywords: Financial economics, Investment
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