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Measuring the costs of short-termism

Author

Listed:
  • Davies, Richard
  • Haldane, Andrew G.
  • Nielsen, Mette
  • Pezzini, Silvia

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.

Suggested Citation

  • Davies, Richard & Haldane, Andrew G. & Nielsen, Mette & Pezzini, Silvia, 2014. "Measuring the costs of short-termism," Journal of Financial Stability, Elsevier, vol. 12(C), pages 16-25.
    • Handle: RePEc:eee:finsta:v:12:y:2014:i:c:p:16-25
    DOI: 10.1016/j.jfs.2013.07.002
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    References listed on IDEAS

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