Learning and the Capital Age Premium
UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance
Topic: Learning and the Capital Age Premium
Speaker: Kai Li, Hong Kong University of Science and Technology
Abstract: We introduce imperfect information and parameter learning into a production-based asset pricing model. Our model features slow learning about firms’ exposure to aggregate productivity shocks over time. In contrast to a full information case, our framework provides a unified explanation for the stylized empirical features of the cross-section of stocks that differ in capital age: old capital firms (1) have higher capital allocation efficiency; (2) are more exposed to aggregate productivity shocks and, hence, earn higher expected returns, which we refer to as capital age premium; and (3) have shorter cash-flow duration, when compared to young capital firms.
Date: Wednesday, 31 July 2019
Time: 12.00 – 1.00 p.m.
Venue: University of Technology, Sydney
Building 8, Room 08.002, Dr Chau Chak Wing Building
Dr Chau Chak Wing Building
14 - 28 Ultimo Road, Ultimo
Co-ordinator: Claire Liu (Ph: +61 2 9514 7748)
Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)