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The Equity Premium Consensus Forecast Revisited

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Author Info
Ivo Welch (Yale School of Management)

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Abstract

A seller wishes to sell an object to one of multiple bidders. The valuations of the bidders are privately known. We consider the joint design problem in which the seller can decide the accuracy by which bidders learn their valuation and to whom to sell at what price. We establish that optimal information structures in an optimal auction exhibit a number of properties: (i) information structures can be represented by monotone partitions, (ii) the cardinality of each partition is finite, (iii) the partitions are asymmetric across agents. These properties imply that the optimal selling strategy of a seller can be implemented by a sequence of exclusive take-it or leave-it offers.

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File URL: http://cowles.econ.yale.edu/P/cd/d13a/d1325.pdf
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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1325.

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Length: 14 pages
Date of creation: Sep 2001
Date of revision:
Handle: RePEc:cwl:cwldpp:1325

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Related research
Keywords: Equity premium;

Find related papers by JEL classification:
G00 - Financial Economics - - General - - - General
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G30 - Financial Economics - - Corporate Finance and Governance - - - General
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. John R. Graham & Campbell R. Harvey, 2001. "Expectations of Equity Risk Premia, Volatility and Asymmetry from a Corporate Finance Perspective," NBER Working Papers 8678, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Ivo Welch, 2000. "Views of Financial Economists on the Equity Premium and on Professional Controversies," Yale School of Management Working Papers ysm122, Yale School of Management. [Downloadable!]
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fernandez, Pablo & Aguirreamalloa, Javier & Liechtenstein, Heinrich, 2009. "The equity premium puzzle: High required equity premium, undervaluation and self fulfilling prophecy," IESE Research Papers D/821, IESE Business School. [Downloadable!]
  2. Fernandez, Pablo, 2008. "The equity premium in 100 textbooks," IESE Research Papers D/757, IESE Business School. [Downloadable!]
    Other versions:
  3. Fernandez, Pablo, 2009. "Prima de Riesgo del Mercado: Histórica, Esperada, Exigida e Implícita
    [Equity Risk Premium: Historic, Expected, Required and Implied]    ," MPRA Paper 14221, University Library of Munich, Germany. [Downloadable!]
  4. Rui Alpalhão & Paulo Alves, 2005. "The Portuguese equity risk premium: what we know and what we don’t know," Applied Financial Economics, Taylor and Francis Journals, vol. 15(7), pages 489-498, April. [Downloadable!] (restricted)
  5. Barrett, Alan & Kearney, Ide & O'Brien, Martin, 2007. "Quarterly Economic Commentary, Summer 2007," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20072, August. [Downloadable!]
    Other versions:
  6. John R. Graham & Campbell R. Harvey, 2001. "Expectations of Equity Risk Premia, Volatility and Asymmetry from a Corporate Finance Perspective," NBER Working Papers 8678, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Pástor, Luboš & Veronesi, Pietro, 2003. "Stock Prices and IPO Waves," CEPR Discussion Papers 4002, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Kyri Kyriacou & Jacob Madsen & Bryan Mase, 2004. "The Equity Premium," Economics and Finance Discussion Papers 04-10, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
    Other versions:
  9. Fernandez, Pablo, 2009. "Market risk premium used in 2008: A survey of more than a 1,000 professors," IESE Research Papers D/784, IESE Business School. [Downloadable!]
  10. George M. Constantinides, 2002. "Rational Asset Prices," NBER Working Papers 8826, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Daniel Bergstresser & Mihir A. Desai & Joshua Rauh, 2004. "Earnings Manipulation and Managerial Investment Decisions: Evidence from Sponsored Pension Plans," NBER Working Papers 10543, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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