The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New Ventures
We derive a mathematical extension of the social discount rate (SDR) in such a way that we can valuate intergenerational startups financed with personal and government funds at the aggregate level. The results imply that the precise determination of the SDR can change the financial priority of inves...
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Format: | Article |
Language: | English |
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Instituto Mexicano de Ejecutivos de Finanzas
2021-03-01
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Series: | Revista Mexicana de Economía y Finanzas Nueva Época REMEF |
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Online Access: | https://www.remef.org.mx/index.php/remef/article/view/610 |
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author | David Ceballos Hornero Samuel Mongrut Montalván |
author_facet | David Ceballos Hornero Samuel Mongrut Montalván |
author_sort | David Ceballos Hornero |
collection | DOAJ |
description | We derive a mathematical extension of the social discount rate (SDR) in such a way that we can valuate intergenerational startups financed with personal and government funds at the aggregate level. The results imply that the precise determination of the SDR can change the financial priority of investment. Therefore, we recommend government officials to include factors of economic growth (wealth effect), intergenerational prevention (precautionary effect), loss aversion, and the specific risk of the business in the valuation of new ventures and in the estimation of the social discount rate to be more representative of the social utility. Our contribution lies in including a risk premium from the firm’s average non-systematic risk and the loss aversion of a representative investor in estimating the SDR. |
first_indexed | 2024-04-13T20:17:37Z |
format | Article |
id | doaj.art-a3da697836834e5c84ccaf8d588f98be |
institution | Directory Open Access Journal |
issn | 2448-6795 |
language | English |
last_indexed | 2024-04-13T20:17:37Z |
publishDate | 2021-03-01 |
publisher | Instituto Mexicano de Ejecutivos de Finanzas |
record_format | Article |
series | Revista Mexicana de Economía y Finanzas Nueva Época REMEF |
spelling | doaj.art-a3da697836834e5c84ccaf8d588f98be2022-12-22T02:31:40ZengInstituto Mexicano de Ejecutivos de FinanzasRevista Mexicana de Economía y Finanzas Nueva Época REMEF2448-67952021-03-01164e610e61010.21919/remef.v16i4.610417The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New VenturesDavid Ceballos HorneroSamuel Mongrut MontalvánWe derive a mathematical extension of the social discount rate (SDR) in such a way that we can valuate intergenerational startups financed with personal and government funds at the aggregate level. The results imply that the precise determination of the SDR can change the financial priority of investment. Therefore, we recommend government officials to include factors of economic growth (wealth effect), intergenerational prevention (precautionary effect), loss aversion, and the specific risk of the business in the valuation of new ventures and in the estimation of the social discount rate to be more representative of the social utility. Our contribution lies in including a risk premium from the firm’s average non-systematic risk and the loss aversion of a representative investor in estimating the SDR.https://www.remef.org.mx/index.php/remef/article/view/610social discount rate, non-systematic risk, loss aversion, entrepreneurship. |
spellingShingle | David Ceballos Hornero Samuel Mongrut Montalván The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New Ventures Revista Mexicana de Economía y Finanzas Nueva Época REMEF social discount rate, non-systematic risk, loss aversion, entrepreneurship. |
title | The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New Ventures |
title_full | The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New Ventures |
title_fullStr | The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New Ventures |
title_full_unstemmed | The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New Ventures |
title_short | The Entrepreneurial Social Discount Rate: Risk Premium and Loss Aversion in New Ventures |
title_sort | entrepreneurial social discount rate risk premium and loss aversion in new ventures |
topic | social discount rate, non-systematic risk, loss aversion, entrepreneurship. |
url | https://www.remef.org.mx/index.php/remef/article/view/610 |
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