Testing for Short Termism in the UK Stock Market
Bibliographic Data
| ID | 9710103 |
|---|---|
| Authors | David Miles (0000-0002-6387-0041, Bank of England, corresponding author) |
| Year | 1993 |
| Volume | 103 |
| Issue | 421 |
| Pages | 1379 |
| Publication date | 1993-11-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.2307/2234472 |
| OpenAlex | W1979752826 |
| Language | EN |
| Citations received | 3 |
| References cited | 6 |
This paper uses data on the stock market valuations of a large sample of UK companies to assess if that market displays short-termism. Tests are undertaken of whether discount rates, implicit in market valuations, applied to cash flows which accrue in the longer term are too high, both absolutely and relative to the rates applied to cash flows in the near term. I find prima facie evidence that these longer-term discount rates are too high, a result consistent with the existence of short-termism. An alternative interpretation of the results is that risk premia applied to expected cash flows systematically increase with the maturity of those flows; whether this interpretation is consistent with asset pricing theories is questionable. Copyright 1993 by Royal Economic Society
Business · Economics · Financial economics · Financial system · Geography · Monetary economics · Stock (firearms · Stock market · Corporate Finance and Governance · Financial Markets and Investment Strategies · Financial Reporting and Valuation Research
| Citations per year | 0.1 |
|---|---|
| Citation span | 1997 - 2022 (26) |
| Highly cited | No |