Optimal dividend distribution policy from the perspective of the impatient and loss-averse investor
AbstractThis paper discusses a problem concerning intertemporal decision-making under uncertainty when its subject has psychological biases. Here, we consider an investment company as a decision maker that invests money from investors in a financial asset and pays some dividend every period depending on the performance of the investment. On the other hand, we assume investors have such psychological biases as inconsistent time preference and loss aversion. Through numerical experiments we show that the optimal dividend distribution under inconsistent time preference and loss aversion is quite different from the distribution without these psychological factors, and that combinations of the two factors produce various patterns of dividend distribution.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).
Volume (Year): 38 (2009)
Issue (Month): 3 (June)
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Web page: http://www.elsevier.com/locate/inca/620175
Time inconsistent preference Loss aversion Quasi-hyperbolic discounting Reference-dependent preference Intertemporal choice;
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