On the invariance of the rate of return to convex adjustment costs by Andrew B. Abel

Cover of: On the invariance of the rate of return to convex adjustment costs | Andrew B. Abel

Published by National Bureau of Economic Research in Cambridge, MA .

Written in English

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Subjects:

  • Capital costs.,
  • Capital investments.,
  • Rate of return.,
  • Economic development.

Edition Notes

Book details

StatementAndrew B. Abel.
SeriesNBER working paper series -- no. 8635, NBER working paper series -- no. 8649, Working paper series (National Bureau of Economic Research) -- working paper no. 8635., Working paper series (National Bureau of Economic Research) -- working paper no. 8649.
ContributionsNational Bureau of Economic Research.
The Physical Object
Pagination19 p. :
Number of Pages19
ID Numbers
Open LibraryOL22430039M

Download On the invariance of the rate of return to convex adjustment costs

Of return is invariant to the introduction of convex adjustment costs, though the capital–dels,convexadjustment costs reduce the growth rate and rate of return on capital.

Journal of Economic LiteratureClassificationNumber:E2. ElsevierScience(USA). Published: Andrew B. Abel, "On the Invariance of the Rate of Return to Convex Adjustment Costs," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pagesJuly. citation courtesy of.

Users who downloaded this paper also downloaded* these:Cited by: On the Invariance of the Rate of Return to Convex Adjustment Costs ∗ Andrew B. Abel† The Wharton School of the University of Pennsylvania and National Bureau of Economic Research Abstract The Modified Golden Rule describes the relationship between the rate of return on capital and the growth rate of the capital stock along.

On the Invariance of the Rate of Return to Convex Adjustment Costs Andrew B. Abel NBER Working Paper No. December JEL No. E2 ABSTRACT The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely-livedCited by: On the Invariance of the Rate of Return to Convex Adjustment Costs Article in Review of Economic Dynamics 5(3) February with 14 Reads How we measure 'reads'.

Abstract. The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely-lived consumer, is invariant to the introduction of convex capital adjustment costs.

"On the Invariance of the Rate of Return to Convex Adjustment Costs," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. Andrew B. Abel, "On the Invariance of the Rate of Return to Convex Adjustment Costs," NBER Working PapersNational Bureau of Economic Research, Inc.

Andrew B. Abel, "On the Invariance of the Rate of Return to Convex Adjustment Costs," NBER Working PapersNational Bureau of Economic Research, Inc. The modified golden rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely lived consumer, is invariant to the introduction of On the invariance of the rate of return to convex adjustment costs book capital adjustment costs.

Therefore, along balanced growth paths in neoclassical optimal growth models with an exogenous long-run growth rate. On the Invariance of the Rate of Return to Convex Adjustment Costs.

Article. Feb ; In the presence of convex costs of adjustment, investment is an increasing function of q, the shadow. On the Invariance of the Rate of Return to Convex Adjustment Costs. By Andrew B.

Abel. Get PDF ( KB) Abstract. The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely-lived consumer, is invariant to the. Download PDF: Sorry, we are unable to provide the full text but you may find it at the following location(s): (external link).

On the invariance of the rate of return to convex adjustment costs. Cambridge, MA.: National Bureau of Economic Research, © (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Andrew B. CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): The Modified Golden Rule describes the relationship between the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely-lived consumer.

This relationship is invariant to the introduction of convex adjustment costs for capital. Get this from a library. On the invariance of the rate of return to convex adjustment costs. [Andrew B Abel; National Bureau of Economic Research.] -- Abstract: The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative.

Read the latest articles of Review of Economic Dynamics atElsevier’s leading platform of peer-reviewed scholarly literature. Abstract. The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely-lived consumer, is invariant to the introduction of convex capital adjustment costs.

NBER WORKING PAPER SERIES ON THE INVARIANCE OF THE RATE OF RETURN TO CONVEX ADJUSTMENT COSTS. By and Andrew B. Abel and Andrew B. Abel and Andrew B. Abel. Abstract. Urban Jermann, Amir Yaron and the Penn Macro Lunch Group for helpful discussion, and an anonymous referee for helpful comments.

The views expressed herein are those of the author. On the Invariance of the Rate of Return to Convex Adjustment Costs Review of Economic Dynamics,5, (3), View citations (5) See also Working Paper () The Effects of Investing Social Security Funds in the Stock Market When Fixed Costs.

On the Invariance of the Rate of Return to Convex Adjustment Costs by Andrew B. Abel; Energy Price Uncertainty and Optimal Factor Intensity: A Mean-Variance Analysis. by Abel, Andrew B. The Present Value of Profits and Cyclical Movements in Investment. The investment decision: a re-examination of competing theories using panel data (English) Abstract.

In the United States, gross business fixed investments constitute about 10 percent of. Optimal Investment with Convex Adjustment Costs The State of the World: •The firm is a price taker in competitive markets.

•Labor is flexible (can be adjusted without cost). •The only barrier to full and fast deployment of the profit maximizing stock of capital are the convex costs of adjusting the capital stock. DeepDyve is the largest online rental service for scholarly research with thousands of academic publications available at your fingertips.

Panel B of Fig. 1 plots Tobin’s q for θ = 2, 5, The lower the capital adjustment cost θ, the higher Tobin’s q(r).Also, q(r) is decreasing and convex in antly, in a low interest rate environment such as today’s, firm value is very sensitive to capital illiquidity.

1It is assumed the adjustment cost ˘is directly taken from output. This implies, under the growing economy, the upper bound of the distribution of the costs keeps growing with the same growth rate of output. To avoid this problem, the costs can be denominated as a fraction of production zf(k) as Bloom ().

If labor is introduced to. In line with Kogan (), I introduce convex adjustment costs in my framework in the form of an upper bound on the investment/disinvestment rate, i.e., there exists a maximum rate at which the firm can invest/disinvest.

13 In this case, since the amount of capital that can be exchanged in the economy is capped from above, the fluctuations of. "On the Invariance of the Rate of Return to Convex Adjustment Costs," Review of Economic Dynamics 5, 3 (July ), ; [supercedes "The Golden Rule with Convex Adjustment Costs"].

An Exploration of the Effects of Pessimism and Doubt on Asset Returns," Journal of Economic Dynamics and Control, 26, (July ), More specifically, the book serves as an introduction to those concepts in linear algebra, analysis and convexity that are most important in static optimization.

“On the Invariance of the Rate of Return to Convex Adjustment Costs,” Review of Economic Dynamics. 5, 3 (July ), “An Exploration of the Effects of Pessimism and Doubt on Asset Returns,” Journal of Economic Dynamics and Control, 26, (July ), “On the Invariance of the Rate of Return to Convex Adjustment Costs,” Review of Economic Dynamics.

5, 3 (July ), Adjustment Costs, and Irreversibility," Journal of Economic Dynamics and Control, 21, (May ),with Janice C. Eberly. Second, rms face quadratic adjustment costs and operating costs. Third, the representative household has recursive utility de ned over aggregate streams of consumption.

We nd that our calibrated model produces a realistic size premium and captures the salient. Convexity is a risk-management tool, used to measure and manage a portfolio's exposure to market risk. Convexity is a measure of the curvature.

The model with convex adjustment costs of (Belo and Lin, ), written independently from and simultaneously with this paper, shows that labor demand responsiveness to changes in the discount rate decreases as adjustment costs increase.

Using the industry level of labor skill as a proxy for the industry labor adjustment costs, they find that. Over a year period, the average return on stocks with high sensitivities to liquidity exceeds that for stocks with low sensitivities by % annually, adjusted for exposures to the market return as well as size, value, and momentum factors.

On the Invariance of the Rate of Return to Convex Adjustment Costs Andrew B. Abel. includes an automatic adjustment for risk. Finally, because the denominator of q is a firm’s replacement value and not its book value, q is less sensitive to inflation than the accounting rate of return.2 Accounting estimates of q have smaller average errors than the accounting rate of return.

"Loss-Leader Pricing" published on 31 Mar by Edward Elgar Publishing Limited. The compound rate of return is calculated as follow: V 0 (1 + r) 2 = V 2. With a reinvestment rate equal to the YTM, the realised compound return (compound rate of return on a bond with all coupons reinvested until maturity) equals YTM.

The problem with conventional YTM occurs when reinvestment rates can change over time. -real rate of return-the nom r o r minus the inflation rate EQ • Suppose a bank makes a 30 year home loan at an interest rate of 7%.

If the rate of inflation is 3% over that period: bank's actual rate of return = 7% - 3% = 4% • If inflation rises unexpectedly to 13% as it did in late s.

Now the actual rate of return = 7% - 13% = - 6%. A firm employs workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3, and the marginal product of capital is 5. The firm could increase its output at no extra cost by employing more capital and less labor.

wedge between the benefits and the foregone output costs of training, ignoring the direct costs of training is likely to yield a rate of return to training that is absurdly high (unless the marginal product of labor function is convex, so that the marginal product exceeds the average product of labor).

rationalize strictly convex adjustment costs are not entirely convincing. Many adjustment costs (for example, transaction, search, and information costs) are in fact concave.3 The apparent success of this theory of investment seems therefore less a result of its own merits than of.

The Federal Reserve Board of Governors in Washington DC. Abstract: International spillovers and exchange rate dynamics are examined in a two-country dynamic optimizing model that allows for idiosyncratic tastes across countries.

Specifically, there is a home-good bias in consumption patterns: at given relative prices the ratio of home goods consumed to foreign goods consumed is .In return for making an investment, the venture capitalist gets what is essentially an equity position in the project (more on this below).

The venture capital problem exists precisely because the costs of building expertise and infrastructure are convex as described. This has a few implications.

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