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Essays in Finance and Economics

  • Author(s): Schulz, Florian
  • Advisor(s): Garmaise, Mark J.
  • et al.
Abstract

The first chapter of this dissertation revisits discount rates. In a recent article "On the Timing and Pricing of Dividends", van Binsbergen, Brandt, and Koijen (2012) empirically investigate term structure properties of the equity premium by recovering prices of the short-term component of the market index. Their finding of a downward-sloping term structure of the equity premium contradicts predictions of many leading consumption-based asset pricing theories. In this paper, I provide an alternative explanation and show that the higher average rate of return on the short-term component of the index, as extracted by BBK, is fully explainable by the fact that investors are compensated for the extra tax burden of dividends on the ex-date and does not represent compensation for risk.

The second chapter of this dissertation is co-authored with Raymond Fisman and Vikrant Vig and is titled "The Private Returns to Public Office". In this paper, we study the wealth accumulation of Indian state politicians using public disclosures required of all candidates. The annual asset growth of winners is 3-5 percent higher than runners-up, a difference that holds also in a set of close elections. The relative asset growth of winners is greater in more corrupt states and for those holding ministerial positions. These results are consistent with a rent-seeking explanation for the relatively high rate of growth in winners' assets.

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