9
votes
What determines whether slavery is economically efficient in industrialized/modern era economies?
Necessary Caveats When Discussing Slavery:
First before tackling this question it is important to note that this issue is broad and complex. This is because there is no single 'slavery'. For example, ...
- 57.7k
8
votes
Accepted
How to convert daily returns to annual returns?
So, let me start with your second question. No you cannot multiply by 365. You could approximate it by $$\log(\text{Annual Return})=365*\log(\text{Daily Return}),$$ but for what you are doing, it ...
- 2,006
6
votes
Accepted
Aggregate production function and returns to scale
I am assuming that you are interested in finding the aggregate production function when you have two plants and they use same inputs. So if you have $k$ units of capital and $l$ units of labor in ...
- 9,421
4
votes
If return rises by same % as inflation rate rises, then perfect inflation hedge?
Not 100% sure of what you need help with, but ill throw some things here and if it doesn't help tell me and ill delete this answer. Since you asked to "mathematically show why this is the case&...
- 159
4
votes
Accepted
Relationship between capital and decreasing marginal prodcutivity
The claim is not that capital decreases marginal productivity, but that the marginal productivity of capital is decreasing. (See "diminishing returns.") That is, the first "unit" ...
- 29.6k
3
votes
Why is the Chinese stock market weak while its economy is strong?
Well for one, the stock market doesn't inherently represent the real economy, while they do of course tend to be correlated, it is entirely possible (though usually somewhat unlikely) to have a ...
- 149
3
votes
Accepted
Intertemporal budget constraint notion
At time $(t-1)$, the investor buys some risk free bond, $B_{t-1}$ and some risky asset $X_{t-1}$ at price $P_{t-1}$, such that the budget constraint holds, i.e.
$$
W_{t-1} = B_{t-1} + P_{t-1}X_{t-1}
$...
- 1,924
2
votes
Stock return predictability. Why do papers continue to use Granger Causality tests
Because the papers which use these methods are not properly refereed. That's why you should read papers published in high impact factor journals.
- 2,020
2
votes
ROI and stock rates
I agree with Dan it is likely a typo.
Some definitions (using your notations)
Investment : $f_0$
Investment one year later : $f_1$
Net income : $f_1 - f_0$
ROI: $-1 + \frac{f_1}{f_0}$
It follows ...
- 1,435
2
votes
Solving a problem using CAPM and capital structure theory
@chsk gives the correct answer if the firm has to raise funds using the equity market and the cost of those funds is the same as that for the firm. However, I would recommend that this firm do the ...
- 16.3k
2
votes
Why are break-even and shut down points based on average cost?
My students also frequently make the mistake of thinking they "understand the basic idea of" something, when what they actually know is a formula to calculate some aspect of it.
Average costs being ...
- 29.6k
2
votes
Accepted
Why are break-even and shut down points based on average cost?
When you are finding the break even point, you are looking for a price-point.
The price is essentially the average (and marginal) revenue. Suppose price of good $x$ is $p$.
Revenue = $p * x$.
...
- 6,246
2
votes
What's the economic argument (if any) for taxing dividends as ordinary income?
Dividends have to be taxed as income, as otherwise people can incorporate, have their wages taxed as revenue for the corporation, and then pay themselves a dividend. (Canada adjusts taxes on dividends ...
- 9,907
1
vote
How to formulate intra-day return?
It is an approximation, but it is appropriate for small values (i.e. returns close to zero, what exactly small means depends on the precision you want to achieve) and it comes from the first order ...
- 166
1
vote
If return rises by same % as inflation rate rises, then perfect inflation hedge?
Yes, if returns always change by the same percentage as inflation, it's a perfect inflation hedge.
What is a perfect inflation hedge? It's a position whose change in returns perfectly correlates (...
- 1,652
1
vote
What determines whether slavery is economically efficient in industrialized/modern era economies?
Why are profits higher from agricultural/automatable work, but not those from factory work and non-automatable services, when using slaves rather than wage labor?
Labor with freedom enables the ...
- 539
1
vote
What determines whether slavery is economically efficient in industrialized/modern era economies?
Prices were too high. 2 billion pounds of cotton were picked annually by 2 million american slaves at ten cents per pound. That's 100 dollars per year output for a slave that cost thousands, plus ...
- 21
1
vote
Why do different product-markets record different rates of return if the assumption of competitive markets hold?
Your figures reports ex-post (say end of year) returns on capital investments. Ex-ante (beginning of the year, or before the investment) these returns are random and unknown, and there is a trade-off ...
- 3,481
1
vote
Why do different product-markets record different rates of return if the assumption of competitive markets hold?
Edit: after OP made changes to his question and clarification this answer became less relevant. I am still keeping it here because OP said some parts of it and references are still useful.
There are ...
- 57.7k
1
vote
Why does the Market Risk Premium increase in times of crisis?
Let's first clarify one concept. Risk premium is the extra expected return that an investor demands (not of the market, here is the key) over the return of risk-free asset (usually government bonds). ...
- 319
1
vote
Why does the Market Risk Premium increase in times of crisis?
Risk premium is the excess expected return of the market over that of the risk-free asset. (There is no "(expected) risk premium".)
It is a property of the expected returns of two assets. It is an ...
- 2,619
1
vote
Estimating the rental rate of capital from data
Time series on rental price of capital can be estimated using $$r=\frac{P_k}{P}(i-inf+\delta)$$
here, $P_k$ is the price of capital goods (price index for capital goods), $P$ is a deflator, $i$ is ...
- 2,020
1
vote
Solving a problem using CAPM and capital structure theory
Assuming that the project has the same beta as the firm's existing assets -- and assuming I'm remembering what I learned in my introductory CorpFin class correctly --, you are indeed right. The ...
- 335
1
vote
Accepted
Leveraged Return on Investment
I am not sure I understand your question. In most projects, the bulk of the investment is a down payment, so the ROI is meant to capture precisely that. I.e. the average return that the money you put ...
- 4,198
1
vote
Accepted
How to calculate cost of equity?
Your formula is wrong. The derivation for the cost of equity $r_E$ is actually:
$r_A = r_D(1-t)\frac{D}{V}+r_E \frac{E}{V}\\
r_E \frac{E}{V} = r_A - r_D(1-t)\frac{D}{V}\\
r_E = r_A \frac{V}{E} - ...
- 326
1
vote
intuitive interpretation of the marginal return/productivity of capital being less than one
Several thoughts in this area:
1) Capital stock lasts over time. I may trade 1 euro for 1 unit of capital. This capital returns 0.01 euros every period forever. It pays itself off eventually.
2) ...
- 3,477
1
vote
Should housing be considered a form of capital for the purpose of capital gains taxation?
Should housing be considered a form of capital for the purpose of
capital gains taxation?
Chamley-Judd's proposition aims at avoid[ing] unlimited growth in tax compounding as the horizon extends.
...
- 1,807
1
vote
Accepted
Should housing be considered a form of capital for the purpose of capital gains taxation?
I think there are a few different ways one can go about examining the topic and general question you bring up. For that reason, I'd like to highlight that this isn't my primary field, and so my answer ...
- 1,380
1
vote
Determining the capital return from the investment in dynamic firms and their growth
I put the article through translate and it appears that this is the (translated) section you are talking about:
"To achieve this selection of 50 nuggets, the Tech Tour did not scan only the continent,...
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Only top scored, non community-wiki answers of a minimum length are eligible