Measuring the Costs of Short-Termism

Posted: 12 Oct 2015

See all articles by Richard Davies

Richard Davies

Bank of England

Andrew Haldane

Bank of England

Mette Nielsen

Bank of England

Silvia Pezzini

Hong Kong Monetary Authority

Date Written: July 9, 2013

Abstract

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

Suggested Citation

Davies, Richard and Haldane, Andrew and Nielsen, Mette and Pezzini, Silvia, Measuring the Costs of Short-Termism (July 9, 2013). Journal of Financial Stability, Vol. 12, 2014. Available at SSRN: https://ssrn.com/abstract=2672698

Richard Davies

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Andrew Haldane

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Mette Nielsen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Silvia Pezzini (Contact Author)

Hong Kong Monetary Authority ( email )

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

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