Evidence that risk adjustment is unnecessary in estimates of the User cost of money

Investors value the special attributes of monetary assets (e.g., exchangeability, liquidity, and safety) and pay a premium for holding them in the form of a lower return rate -- The user cost of holding monetary assets can be measured approximately by the difference between the returns on illiquid r...

Full description

Autores:
Restrepo-Tobón, Diego A.
Tipo de recurso:
Fecha de publicación:
2015
Institución:
Universidad EAFIT
Repositorio:
Repositorio EAFIT
Idioma:
eng
OAI Identifier:
oai:repository.eafit.edu.co:10784/9163
Acceso en línea:
http://hdl.handle.net/10784/9163
Palabra clave:
E41
E51
G12
Formación de hábitos
Costo de uso
MONEDA
MODELOS DE VALORACIÓN DE ACTIVOS DE CAPITAL
LIQUIDEZ
ANÁLISIS DE VALORES (CONTROL DE COSTOS)
Money
Capital assets pricing models
Liquidity (economics)
Value analysis (Cost control)
Rights
License
Copyright (c) 2015 Diego A. Restrepo-Tobón
Description
Summary:Investors value the special attributes of monetary assets (e.g., exchangeability, liquidity, and safety) and pay a premium for holding them in the form of a lower return rate -- The user cost of holding monetary assets can be measured approximately by the difference between the returns on illiquid risky assets and those of safer liquid assets -- A more appropriate measure should adjust this difference by the differential risk of the assets in question -- We investigate the impact that time non-separable preferences has on the estimation of the risk-adjusted user cost of money -- Using U.K. data from 1965Q1 to 2011Q1, we estimate a habit-based asset pricing model with money in the utility function and find that the risk adjustment for risky monetary assets is negligible -- Thus, researchers can dispense with risk adjusting the user cost of money in constructing monetary aggregate indexes