Hyperbolic discounting boosts value premium, reshaping global investment returns.
The value premium in stock returns increases with the degree of impatience due to hyperbolic discounting. This means that investors who are more impatient tend to see higher returns on value stocks compared to growth stocks. The researchers tested this idea in 41 countries and found that the size of the value premium was indeed related to the level of impatience in those countries. This relationship held even when considering other factors like risk aversion and economic variables.