In accounting models of value, dividends typically appear to have a strong positive relationship with value despite theoretical reasons to expect dividend displacement. We show that this result is driven by the relationship between dividends and both core earnings and other information derived from the valuation error in the prior year. Where core earnings can be effectively modelled in a speci...

We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable “salary” component indexed to the aggregate wage bill and to aggregate dividends. Tying a manager’s compensation to th...

In several multi-good models in the literature we see in equilibrium that the span of the stocks drop relative to the span of the dividends, which is not a desirable feature. Therefore, in this paper, we investigate conditions for endogenous completeness and incompleteness in continuous-time financial markets driven by diffusion processes with multiple consumption goods and heterogeneous agents...

Dividends are taxed at both the corporate and personal levels in the United States. This double taxation of dividends may distort investment efficiency. Partly motivated by this consideration, the US Congress enacted the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) in 2003. This act reduced the tax rates on dividends and capital gains, and eliminated the wedge between these two tax ra...

We present a decision theoretic framework in which agents are learning about market behavior and that provides microfoundations for models of adaptive learning. Agents are ‘internally rational’, i.e., maximize discounted expected utility under uncertainty given consistent subjective beliefs about the future, but agents may not be ‘externally rational’, i.e., may not know the true stochastic pro...