The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.
Phillipp Gnan, Vienna University of Economics and Business (WU Wien)
Revisiting Discount Rates: New Evidence from Surveys
(with Maximilian Schleritzko)
This paper studies retail investors’ risk-return trade-off. Existing evidence from surveys suggests that households expect lower returns, i.e., lower risk compensation, in bad times. Using a direct measure of retail investors’ subjective discount rates, we find that required compensation for risk nevertheless rises with perceptions of stock market risk. This finding resonates well with long-established principles in asset pricing. We also show that discount rates and perceived risk are more tightly connected for financially literate retail investors and during times of financial and economic distress. Our results have important implications for modelling households’ risk-return trade-off and the design of future surveys eliciting return expectations.