Trigger-Target Rules Need Not be Optimal with Fixed Adjustment Costs: A Simple Comment on Optimal Money Holding Under Uncertainty

1990 ◽  
Vol 31 (1) ◽  
pp. 229 ◽  
Author(s):  
Avner Bar-Ilan
Keyword(s):  
Adjustment Costs ◽  
Money Holding

The Micro and Macro of Managerial Beliefs

2020 ◽  
Author(s):  
Jose Maria Barrero
Keyword(s):  
Rational Expectations ◽  
Asset Price ◽  
Heterogeneous Firms ◽  
Adjustment Costs ◽  
Consumer Welfare ◽  
Sales Growth ◽  
Firm Level ◽  
Managerial Decisions ◽  
Managerial Beliefs ◽  
Growth Volatility

This paper studies how biases in managerial beliefs affect managerial decisions, firm performance, and the macroeconomy. Using a new survey of US managers I establish three facts. (1) Managers are not over-optimistic: sales growth forecasts on average do not exceed realizations. (2) Managers are overprecise (overconfident): they underestimate future sales growth volatility. (3) Managers overextrapolate: their forecasts are too optimistic after positive shocks and too pessimistic after negative shocks. To quantify the implications of these facts, I estimate a dynamic general equilibrium model in which managers of heterogeneous firms use a subjective beliefs process to make forward-looking hiring decisions. Overprecision and overextrapolation lead managers to overreact to firm-level shocks and overspend on adjustment costs, destroying 2.1 percent of the typical firm’s value. Pervasive overreaction leads to excess volatility and reallocation, lowering consumer welfare by 0.5 to 2.3 percent relative to the rational expectations equilibrium. These findings suggest overreaction may amplify asset-price and business cycle fluctuations.

Forward trading and adjustment costs in Cournot markets

2000 ◽  
Vol 37 (1) ◽  
pp. 177-195 ◽  
Author(s):  
Henry Thille ◽  
Margaret E. Slade
Keyword(s):  
Adjustment Costs ◽  
Forward Trading

Adjustment Costs and the Realization of Target Leverage of Spanish Public Firms

2011 ◽  
Author(s):  
Gonzalo Rubio ◽  
Francisco Sogorb-Mira
Keyword(s):  
Adjustment Costs ◽  
Public Firms ◽  
Target Leverage

The Effects of Housing Adjustment Costs on Consumption Dynamics

2015 ◽  
Author(s):  
Benjamin S. Kay
Keyword(s):  
Adjustment Costs ◽  
Consumption Dynamics

Indirect Adjustment-Costs in Firms and Markets

2001 ◽  
Author(s):  
Birger Wernerfelt
Keyword(s):  
Adjustment Costs

Adjustment Costs and Factor Demand: New Evidence from Firmss Real Estate

2017 ◽  
Author(s):  
Antonin Bergeaud ◽  
Simon Ray
Keyword(s):  
Real Estate ◽  
Adjustment Costs ◽  
Factor Demand ◽  
New Evidence

Shiftwork, Adjustment Costs and Uncertainty

2002 ◽  
Author(s):  
Yishay Maoz
Keyword(s):  
Adjustment Costs

Bunching and Adjustment Costs: Evidence from Cypriot Tax Reforms

2019 ◽  
Author(s):  
Panos Mavrokonstantis
Keyword(s):  
Adjustment Costs ◽  
Tax Reforms
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