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Optimal dividend distribution policy from the perspective of the impatient and loss-averse investor

  • Yang, Yang
  • Shoji, Isao
  • Kanehiro, Sumei
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    This 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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    File URL: http://www.sciencedirect.com/science/article/B6W5H-4VP667X-1/2/282945606be4d4ff4b4d05d0c98cad9c
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    Article 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)
    Pages: 534-540

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    Handle: RePEc:eee:soceco:v:38:y:2009:i:3:p:534-540
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620175

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    1. Karp, Larry, 2005. "Global warming and hyperbolic discounting," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 261-282, February.
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    7. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
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    10. Laibson, David, 1998. "Life-cycle consumption and hyperbolic discount functions," European Economic Review, Elsevier, vol. 42(3-5), pages 861-871, May.
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