00Thaler_FM i-xxvi.qxd

Chapter 8: Josef Lakonishok, Andrei Shleifer, and Robert W. Vishny, “Con- trarian Investment, Extrapolation, and Risk,” Journal ...

(1999), pp. 1–34. © 1999 by The University of Chicago. All rights re- served. Reprinted with permission. Chapter 19: J. B. Heato ...

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ABBREVIATIONS ACT advance corporation tax APT arbitrage pricing theory B/M book-to-market CAPM capital asset pricing model CARA ...

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Advances in Behavioral Finance Volume II ...

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Chapter 19 MANAGERIAL OPTIMISM AND CORPORATE FINANCE J. B. Heaton In this chapter, I explore the implications of a single specif ...

weaker, because there are larger arbitrage bounds protecting managerial ir- rationality than protecting security market misprici ...

In the agency cost approach of Jensen (1986), free cash flow is costly, be- cause of a conflict between managers and shareholder ...

The basic prediction is not new, but the model is parsimonious—it need not invoke the conflicting possibilities of rational, loy ...

Assumption 2:Managers take all projects that they believe have positive net present values (including the perceived net present ...

(who may or may not be the same) have no capital of their own and must finance Kby selling some mix of securities in the capital ...

in any combination: (1) risk-free debt, (2) risky debt, and (3) equity. Debt contracts promise a fixed amount in the future in e ...

debt and equity, and the risk-free component is insensitive to probabilistic beliefs. Therefore, risky debt (that puts positive ...

and then equity (obviously, this is equivalent to an issue of risky debt). The manager perceives the cost of this financing to b ...

Available evidence is consistent with the managerial optimism prediction of upwardly biased cash flow forecasts. Kaplan and Ruba ...

no additional cost of external financing since by assumption there is no informational asymmetry and prices are efficient. Faced ...

present value projects when EM(r)>i>ET(r). This range of projects occurs for probabilistic beliefs where: It is important ...

tests of the theory.^8 Recall that CM(E) is the additional cost of external fi- nancing perceived by the optimistic manager. Whi ...