Discount Rate Research Articles

Monetary Policy Instruments and Stock Market Returns Volatility in Nigeria

The study examines monetary policies instruments impact on stock market volatility in Nigeria for the period of 1993-2022. The study identified the independent variables, namely; reserve requirement (RR), cash reserve ratio (CRR), discount rate (DR) and money supply (MS) which were analyzed in relation to stock market volatility proxied with all share index volatility (ASIV). The data was analyzed with descriptive statistics, correlation matrix several diagnostics tests (VIF, validity test, ADF and Johansen tests) and the multiple regression analysis. The findings revealed that RR, CRR and MS have significant effect on ASIV while DR has insignificant effect on ASIV in Nigeria. It was concluded that reserve requirement, discount rate and money supply exert significant effect on Nigerian economy. Thus, it thereby recommended that management of CBN should put modalities in place to aggressively control ASIV in Nigeria. CBN should put measures in place to increase CRR. This will provide banks opportunity to fund economic transaction in the Nigerian economy, thereby reducing ASIV.

The impact of pandemic threats on intertemporal choices in Chinese and Americans

Intertemporal decisions are crucial to survival, especially when humans are exposed to ecological threats. However, it remains unclear whether and how pandemic threats impact intertemporal choices across cultures. We conducted two studies in two cultural contexts (N = 1180). Study 1a found that Chinese who perceived more pandemic threats showed higher temporal discounting rates (i.e., preferred immediate smaller over delayed larger rewards), and this relationship was mediated by negative emotions. Study 1b, using threat priming, revealed that Chinese participants primed with a high-threat condition (depicting a pandemic threat) showed higher temporal discounting rates compared to those primed with a low-threat condition (describing the flu). Differently, Study 2a revealed that perceived pandemic threat levels of Americans did not directly predict temporal discounting rates. Using similar threat priming, Study 2b further confirmed that Americans in the high-threat priming condition showed no significant differences in temporal discounting rates compared to those in the low-threat priming condition. The current research deepens the understanding of the cultural difference in the impact of pandemic threats on intertemporal decision-making and further informs the development of interventions that promote individual future-oriented thinking in the face of pandemics.

Validation of a novel effort-discounting assessment and evaluation of the effort-delay confound on effort discounting.

A vast literature highlights the prevalence of impulsive decision making in maladaptive outcomes. Most research has focused on one form-delay discounting. Less research has focused on effort discounting, possibly because of a lack of a standardized task for assessment. In published effort-discounting tasks, effort is conceptualized in many ways, making it difficult to compare findings across studies. Additionally, most effort-discounting tasks do not control for the time inherent in completing the effortful task, which makes it difficult to disentangle effort discounting from delay discounting. The current study evaluated the validity of a novel hypothetical effort-discounting task. The novel task was used to evaluate the influence of the effort-delay confound on rates of effort discounting in humans. Participants were randomly assigned to complete a confounded or a controlled version of the novel effort-discounting task. The effort-discounting data were well described by hyperbolic and exponential functions. When effort and delay were confounded, effort-discounting rates were significantly higher than when effort alone influenced discounting. The results suggest that data that are produced by effort-discounting tasks that do not control the effort-delay confound should be interpreted cautiously because they are also influenced by delay discounting. Task limitations and future directions are discussed.

Revisiting elastic string models of forward interest rates

Twenty five years ago, several authors proposed to describe the forward interest rate curve (FRC) as an elastic string along which idiosyncratic shocks propagate, accounting for the peculiar structure of the return correlation across different maturities. In this paper, we revisit the specific ‘stiff’ elastic string field theory of Baaquie and Bouchaud [Stiff field theory of interest rates and psychological future time. Wilmott Mag., 2004, 2–6] in a way that makes its micro-foundation more transparent. Our model can be interpreted as capturing the effect of market forces that set the rates of nearby tenors in a self-referential fashion. The model is parsimonious and accurately reproduces the whole correlation structure of the FRC over the time period 1994–2023, with an error around 1% and with only one adjustable parameter, the value of which being very stable across the last three decades. The dependence of correlation on time resolution (also called the Epps effect) is also faithfully reproduced within the model and leads to a cross-tenor information propagation time on the order of 30 minutes. Finally, we confirm that the perceived time in interest rate markets is a strongly sub-linear function of real time, as surmised by Baaquie and Bouchaud [Stiff field theory of interest rates and psychological future time. Wilmott Mag., 2004, 2–6]. In fact, our results are fully compatible with hyperbolic discounting, in line with the recent behavioral Finance literature Farmer and Geanakoplos [Hyperbolic Discounting is Rational: Valuing the Far Future with Uncertain Discount Rates, Cowles Foundation Discussion Papers, 2009 (Cowles Foundation for Research in Economics, Yale University)].

Time preference shifts in medical decision-making after serious illness

This study explores the impact of serious illnesses, such as cancer, on patients' time preferences in medical decision-making. Specifically, we assess how patients value extending their lifespan by one year under varying survival prognoses through three experimental studies. The findings reveal that patients exhibit a higher Subjective Discount Rates (SDR) in their medical decisions after a serious illness diagnosis. Notably, this difference in individual health also affects the time preferences of their family members. Additionally, the subjective contextual setting of the illness can also increase an individual's SDR levels. The research highlights a tendency for patients and families facing a potential short life expectancy to focus more on immediate concerns, leading to potentially shortsighted and irrational medical choices. This behavior often results in regret during the end-of-life stage. These insights are vital for healthcare professionals in optimizing treatment plans and for policymakers in understanding patient behaviors more comprehensively. The study emphasizes the need for considering psychological and behavioral changes in patients grappling with severe health challenges.

The role of impulsivity and binge eating in outpatients with overweight or obesity: an EEG temporal discounting study

BackgroundBinge eating (BE) is associated with a range of cognitive control deficits related to impulsivity, including lower response inhibition, preference for immediate gratification, and maladaptive decision-making. The aim was to investigate whether impulsivity and BE may interact with the decision process and underlying brain activity in outpatients with overweight or obesity who are starting a treatment to achieve weight loss.MethodsA sample of 26 treatment-seeking outpatients with overweight or obesity was evaluated for impulsivity, BE, and temporal discounting rates. Impulsivity was measured with the Barratt Impulsiveness Scale (BIS-11), according to which two groups were composed: high BIS and low BIS; BE was assessed with the eating disorders module of the Structured Clinical Interview for DSM5—Research Version, according to which two groups were composed: with (BE group) or without BE (NBE group). Changes in subjective value of rewards were measured with the Temporal Discounting Task (TDt) where participants had to choice between sooner but smaller vs. later but larger monetary rewards. These choices were made in two differently delayed conditions (“Now” and “Not-now”). Brain rhythms were recorded through high-density electroencephalogram (hd-EEG) during the TDt.ResultsPatients with BE reported more impulsive tendencies and perceived sooner rewards as more gratifying when both options were delayed (Not-now condition, p = 0.02). The reward choice in the TDt was accompanied by a general EEG alpha band desynchronization in parietal areas observed without differences between experimental conditions and patients groups. No effects were observed within the Now condition or in the other EEG bands.ConclusionsThe tendency to favor immediate rewards may constitute an obstacle to adhering to treatment plans and achieving weight loss goals for outpatients with overweight or obesity. Clinicians are therefore encouraged to include psychological factors, such as impulsivity and dysfunctional eating behaviors, when designing weight loss programs. By addressing these psychological aspects, clinicians can better support patients in overcoming barriers to adherence and achieving sustainable weight loss.Trial registrationThis study was approved by the Ethics Committee of the Department of Psychological, Health, and Territorial Sciences of the University G. d’Annunzio of Chieti-Pescara (Prot. n. 254 of 03/14/2017).

To What Extent Are College Students’ Delay Discounting and Systematic Responding Rates Related to Time of Semester?

Researchers who use undergraduate participants may be concerned about variation in data quality at different times of the semester. For instance, students who are more self-controlled may get their course credit earlier in the semester whereas those who procrastinate may wait until the end. Therefore, a potential time-of-semester effect may influence research data. This study sought to examine the relation between time of semester and delay discounting (DD)—a process that refers to an individual’s sensitivity to delayed rewards. DD may also directly relate to the decision to participate in research. Undergraduate participants completed money (n = 149) and food (n = 150) DD measures. Patterns in DD were examined across the semester. The number of systematic responders (i.e., those that follow a hyperbolic discounting curve) was also examined to determine the extent to which inattentive or random responding might be related to time of semester. Regression analyses revealed that money DD was consistent and stable across the semester. Food DD, controlling for subjective hunger as a co-variate increased slightly, though significantly, at the end of the semester. The percentage of participants with systematic discounting remained high throughout the semester for money and food DD, however, food DD had more variability, particularly towards the middle of the semester. Therefore, for college students, monetary DD is consistent across time of semester, but food DD slightly increases as the semester ends.

Estimation of Social Discount Rate in Iran

Estimation of Social Discount Rate in Iran

The Coase Conjecture When the Monopolist and Customers have Different Discount Rates

AbstractOne of the most famous and outstanding formalizations of the Coase Conjecture is by Gul et al. (J Econ Theory 39(1):155–190, 1986. https://doi.org/10.1016/0022-0531(86)90024-4) peculiarity of their model—as well as nearly all other examinations of the Coase Conjecture, including that by Coase himself—is that it assumes that the monopolist and customers have the same discount rate. I re-examine their model, while relaxing this restriction. Gul et. al. show that, if the (common) discount rate of the monopolist and customers approaches one, then the Coase Conjecture follows. I show that one only needs the discount rate of the customers to approach one for this to be true. I also show a second result: If the customers’ discount rate is fixed at a value less than one, while the monopolist’s discount rate approaches one, then the Coase Conjecture is guaranteed not to follow.

Effects of a 5-HT4 receptor antagonist in the caudate nucleus on the performance of macaques in a delayed reward task

Temporal discounting, in which the recipient of a reward perceives the value of that reward to decrease with delay in its receipt, is associated with impulsivity and psychiatric disorders such as depression. Here, we investigate the role of the serotonin 5-HT4 receptor (5-HT4R) in modulating temporal discounting in the macaque dorsal caudate nucleus (dCDh), the neurons of which have been shown to represent temporally discounted value. We first mapped the 5-HT4R distribution in macaque brains using positron emission tomography (PET) imaging and confirmed dense expression of 5-HT4R in the dCDh. We then examined the effects of a specific 5-HT4R antagonist infused into the dCDh. Blockade of 5-HT4R significantly increased error rates in a goal-directed delayed reward task, indicating an increase in the rate of temporal discounting. This increase was specific to the 5-HT4R blockade because saline controls showed no such effect. The results demonstrate that 5-HT4Rs in the dCDh are involved in reward-evaluation processes, particularly in the context of delay discounting, and suggest that serotonergic transmission via 5-HT4R may be a key component in the neural mechanisms underlying impulsive decisions, potentially contributing to depressive symptoms.

How to maximize the joint benefits of timber production and carbon sequestration for rural areas? A case study of larch plantations in northeast China

BackgroundImplementing large-scale carbon sink afforestation may contribute to carbon neutrality targets and increase the economic benefits of forests in rural areas. However, how to manage planted forests in China to maximize the joint benefits of timber production and carbon sequestration is still unclear. Therefore, the present study quantified the effects of different rotation lengths, thinning treatments, site quality (SCI), stand density (SDI), and management costs on the joint benefits of carbon sequestration and timber production based on a stand-level model system developed for larch plantations in northeast China.ResultsThe performances of the different scenarios on carbon stocks were satisfactory, where the variations in the outcomes of final carbon stocks could be explained by up to 90%. The joint benefits increased significantly with the increases of SDIs and SCIs, regardless of which rotation length and thinning treatments were evaluated. Early thinning treatments decreased the joint benefits significantly by approximately 131.53% and 32.16% of middle- and higher-SDIs, however longer rotations (60 years) could enlarge it by approximately 71.39% and 80.27% in scenarios with and without thinning when compared with a shorter rotation length (40 years). Discount rates and timber prices were the two most important variables affecting joint benefits, while the effects of carbon prices were not as significant as expected in the current trading market in China.ConclusionsThe management plans that promote longer rotations, higher stand densities, and no thinning treatments can maximize the joint benefits of carbon sequestration afforestation and timber production from larch plantations located in northeast China.Graphical

On the Determinants of Discount Rates in Discounted Cash Flow Valuations: A Counterfactual Analysis

On the Determinants of Discount Rates in Discounted Cash Flow Valuations: A Counterfactual Analysis

Utilizing PVSyst for planning a hybrid system rooftop solar power plant at Makassar Eye Hospital

Installing rooftop Solar Power Plants (SPP) represents the most efficient solution for reducing substantial electricity consumption in office buildings and hospitals, as Makassar Eye Hospital exemplifies. The research commences by addressing concerns about electricity availability and daily usage at the hospital while evaluating the solar radiation potential. Subsequently, the development of the SPP system begins. A location assessment is conducted using various tools to gather the necessary data for SPP design. In this study, the planning phase involves the utilization of PVSyst software for the technical analysis of electrical energy generation and system performance calculations. Additionally, the economic analysis includes evaluating the initial investment costs for establishing the SPP and considering prevailing market prices for components. The feasibility of the SPP investment is determined by calculating key financial metrics, including the Payback Period (PP), Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Return on Investment (ROI). According to the economic analysis findings, the initial investment cost for the SPP amounts to Rp. 544.031.733. The energy production value per kilowatt-hour (kWh) stands at Rp. 1.278, resulting in a Payback Period (PP) of 13,8 years, a Net Present Value (NPV) of Rp. 138.182.638, an Internal Rate of Return (IRR) of 11.51%, and a Return on Investment (ROI) of 25.4%. These results affirm the plan's feasibility, as the IRR value surpasses the Discount Rate (8.43%).

Evaluating the economic viability of near-future wave energy development along the Galician coast using LCoE analysis for multiple wave energy devices

The economic profitability of future wave energy production along the Galician coast is assessed by analyzing the Levelized Cost of Energy (LCoE) under different Capital Expenditure (CapEx) scenarios and two discounts rates (5% and 10%). Wave resources for the near future under the RCP8.5 scenario are downscaled using SWAN, providing up to 75 m spatial resolution in coastal areas. The study’s goal is to enhance the cost-effectiveness by selecting the most suitable wave energy converter (WEC) for each location. Fourteen WECs operating at different depths are considered. This analysis reveals that the Atargis device boasts the lowest LCoE for 64.2% of the coastal area, mainly in deep waters, with an LCoE of 77 €/MWh. In addition, the Oyster and Wave Dragon devices exhibit the lowest LCoE for 12.4% and 15.0% of the coastal area, respectively, excelling in shallow waters and near the coast, with values of 50 €/MWh and 97 €/MWh. These findings demonstrate the profitability of wave energy production along the Galician coast, even when considering a more conservative CapEx of 3 M€/MW, resulting in a cost of 140 €/MWh. This conclusion takes into account the evolving electricity prices in Spain, which reached 0.2068 €/kWh in the second half of 2023.

Managing The Impact of Changes in Discount Rate, Forex Rate, Exports & GDP on Imports of Pakistan

The purpose of this study is to investigate how changes in macroeconomic indicators, such as GDP, exports, discount rate, and Forex rate, affect Pakistani imports. It is widely acknowledged that the world has become a global village, with no state being able to meet its own needs for goods and services. As a result, these states are forced to import goods and services that would be extremely expensive to produce locally due to a lack of raw materials. Imports are crucial to global trade because they enable nations to buy raw materials from other countries, transform them into completed goods, and then export those goods for significant profit. Maintaining a positive balance of payments requires the state to maintain an appropriate balance between its imports and exports. Since importing goods and services from overseas requires paying significant foreign exchange, it is imperative that only necessities be imported and that luxury items be avoided. Using data of independent variables, such as export, GDP, discount rate, and Forex rate, and dependent variable, namely import spread over a period from 1972 to 2020, descriptive statistics and diagnostic tests, such as Unit root test, ARDL tests, Bound test, Multicollinaerity, Heteroscedasticity, Correlation, and Autocorrelation, have been conducted. In order to examine the existence of a long-term balance link between import, GDP, interest rate, export, and foreign exchange rate, we have adopted the bounds analysis method to cointegration, which was developed inside the ARDL structure. The results provide strong evidence that the GDP, interest rate, and exchange rate all have an important impact on determining the long- and short-term responses to our nation's imports. Key words: ,

Now or Later? Examining Social and Financial Decision-Making in Middle-to-Older Aged Adults.

Contextually driven decision-making is multidimensional, as individuals need to contend with prioritizing both competing and complementary demands. However, data is limited as to whether temporal discounting rates vary as a function of framing (gains vs. loss) and domain (monetary vs. social) in middle-to-older aged adults. It is also unclear whether socioaffective characteristics like social isolation and loneliness are associated with temporal discounting. Temporal discounting rates were examined across monetary gain, monetary loss, social gain, and social loss conditions in 140 adults aged 50-90 during the Omicron stage of the pandemic. Self-report measures assessed loneliness and social isolation levels. Results found evidence of steeper temporal discounting rates for gains as compared to losses in both domains. Social outcomes were also more steeply discounted than monetary outcomes, without evidence of an interaction with the framing condition. Socioeconomic and socioaffective factors were unexpectedly not associated with temporal discounting rates. Community-dwelling middle-to-older aged adults showed a preference for immediate rewards and devalued social outcomes more than monetary outcomes. These findings have implications for tailoring social and financial incentive programs for middle to later adulthood.

Role of delay discounting in resisting in-class media multitasking under contextual control: a cluster analysis

ABSTRACT The present study examined a potential mechanism underlying college students’ resisting in-class media multitasking under contextual control from a behavioural economic perspective. Using a hierarchical cluster analysis, we first identified subgroups of students who differed in frequencies of media multitasking across two contexts (preferred and non-preferred classes). We then compared a subgroup of students who could resist media multitasking in one context but not in another context with other subgroups of students in terms of rates of delay discounting and levels of impulse control. In the delay-discounting task, participants made a series of choices between smaller amounts of hypothetical monetary rewards available immediately and a larger amount of hypothetical monetary rewards available after a delay. Impulse control was measured by a self-reported scale. The primary finding was that the subgroup of students who could resist media multitasking in preferred but not non-preferred classes showed significantly lower rates of delay discounting than the subgroup of students who frequently engaged in media multitasking in both preferred and non-preferred classes. Implications for developing effective intervention strategies from a behavioural economic perspective are discussed.

Gamification and motivation: Impact on delay discounting performance.

Delay discounting is a phenomenon strongly associated with impulsivity. However, in order for a measured discounting rate in an experiment to meaningfully generalize to choices made elsewhere in life, participants must provide thoughtful, engaged answers during the assessment. Classic discounting tasks may not optimize intrinsic motivation or enjoyment, and a participant who is disengaged from the task is likely to behave in a way that provides a biased estimate of their discounting function. We assessed degree of delay discounting in a task intended to vary level of participant motivation. This was accomplished by introducing varying levels of gamification, the application of game design principles to a non-game context. Experiment 1 compared three versions of the delay discounting task with differing degrees of gamification and compared performance and task enjoyment across those variations, while Experiment 2 used two conditions (one gamified, one not). Participants found more gamified versions of the task more enjoyable than the other conditions, without producing substantial between-group differences in most cases. Thus, more polished task gameplay can provide a more enjoyable experience for participants without undermining delay discounting effects commonly reported in the literature. We also found that in all experimental conditions, higher levels of interest in or enjoyment of the task tended to be associated with more rapid discounting. This may suggest that low task motivation may result in less impulsive choice and suggests that participants who find delay discounting experiments sufficiently boring may bias assessments of value across delays.

Options trading imbalance, cash-flow news, and discount-rate news

Using publicly available information on option volume totals, we develop new measures of directional option-to-stock (O/S) trading volume imbalance. The novel measures are strongly related to the cash-flow (CF) and discount-rate (DR) news components of unexpected stock returns and consistently predict future abnormal performance. While options markets respond more strongly to CF news than do equity markets, they still do not fully incorporate CF news into prices and therefore lead to returns predictability. This underreaction phenomenon is of smaller magnitude when the options market response is stronger and when short-sale constraints are less binding.

Discount rates and cash flows: A local projection approach

We develop flexible local projections to quantify the relative contributions of expected discount rates and cash flows to the variation of dividend yields. Local projections enable the incorporation of large information sets, the use of monthly data along with annual data, and the consideration of time variation in the dividend yield decomposition. By expanding the set of state variables and allowing for time-varying parameters, our results show that the variation of expected discount rates remains the primary contributor to market volatility, whereas the contribution of expected cash flows is considerably smaller.