Estimates of the Marginal Rate of Time Preference and Average Risk Aversion of Investors in Electric Utility Shares: 1960-66
AbstractThis paper develops an econometric model of the valuation of electric utility shares. This model, based upon the Sharpe-Lintner capital market theory, yields indirect estimates of the marginal rate of time preference and average risk aversion of investors in electric utility shares during the period 1960-66. In general, the empirical findings are consistent with the Sharpe-Lintner positive theory of the valuation of risk assets. Investors are found to be risk averse, and the relationship between required return and standard deviation is found to be approximately linear within the range of the sample. From a normative perspective, these estimates of the marginal rate of time preference and risk aversion are shown to yield individual firm cost of capital estimates. In a prior study of the cost of capital to the electric utility industry, Miller and Modigliani assumed that electric utilities were homogeneous with respect to operating risk. The approach employed in the present study takes explicit cognizance of intra-industry differences in operating risk. That is, each firm is considered to be in a unique "risk class," and hence to have a unique marginal cost of equity capital.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 2 (1971)
Issue (Month): 1 (Spring)
Contact details of provider:
Web page: http://www.rje.org
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Arthur J. Robson & Larry Samuelson, 2009.
"The Evolution of Time Preference with Aggregate Uncertainty,"
American Economic Review,
American Economic Association, vol. 99(5), pages 1925-53, December.
- Arthur J. Robson & Larry Samuelson, 2009. "The Evolution of Time Preference with Aggregate Uncertainty," Levine's Working Paper Archive 814577000000000087, David K. Levine.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.