| Project/Area Number |
12630111
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Musashi University |
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Principal Investigator |
KUBOTA Keiichi Faculty of Economics, Musashi Univ. Profssor, 経済学部, 教授 (00120858)
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| Project Period (FY) |
2000 – 2001
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| Project Status |
Completed (Fiscal Year 2001)
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| Budget Amount *help |
¥2,200,000 (Direct Cost: ¥2,200,000)
Fiscal Year 2001: ¥600,000 (Direct Cost: ¥600,000)
Fiscal Year 2000: ¥1,600,000 (Direct Cost: ¥1,600,000)
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| Keywords | cost of capital / productivity of capital / equity premium puzzle / opitimal consumption-investment model / asset pricing theory |
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| Research Abstract |
In this monograph firstly we estimate the required rate of return for equity for all firms listed in the first section of the Tokyo Stock Exchange based on both CAPM and the Fama and French three-factor model. We report the summary statistics at the industry level in Chapter 1 and the result for individual firms are in the Appendix. Relying on both the original Miller and Modigliani tax correction model and the Miller's debt and tax model we demonstrate how the corporate tax rate reduction will affect the cost of capital for both equity financing and debt financing. In Chapter 2 the required return on equity is estimated with the multi-factor model where the different role of financial sector and non-financial sector in the economy is highlighted. The result shed light on the effect of aggregate debt financing to the firms' new investment cut-off rate. In Chapter 4 the difference among income groups on their optimal consumption and risky asset holding decisions is investigated with Euler condition tests from Japanese Government Household Survey and the result shows that for the highest income group the Euler condition was not rejected. In Chapter 4 we compare the marginal efficiency of capital between private investment and public investment with Japan's prefecture level data within a two sector dynamic general equilibrium model framework and find that the former has been predominantly higher than the latter. The last chapter deals with the question of whether the book-to-price ratio is a "characteristic," and we support the view that it is indeed the real risk factor.
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