The “Income-Variance” Risk Factor and Jones &amp; Laughlin v. Pfeifer Guidelines for the Calculation of Present Value

Breeden, Charles H.

doi:10.5085/0898-5510-15.1.19

Cited by 4 publications

(1 citation statement)

References 15 publications

(8 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A similar, more recent discussion has occurred among Bell and Taub (1999), Ireland (1999) and Breeden (2002). Bell and Taub have taken Ireland to task for stating that, once the earnings stream has been adjusted for non-survival, non-participation in the labor force and unemployment, the use of a discount rate that includes a premium for default risk is incorrect in that it involves double counting of the risk that the worker would not earn the projected income.…”

Section: Economic Argumentssupporting

confidence: 60%

Risk, Discounting, and the Present Value of Future Earnings

Brush

2003

Journal of Forensic Economics

View full text Add to dashboard Cite

show abstract

Section: Economic Argumentssupporting

confidence: 60%

Risk, Discounting, and the Present Value of Future Earnings

Brush

2003

Journal of Forensic Economics

View full text Add to dashboard Cite

show abstract

The Role Of Stochastic Dominance In Determining Discount Rates In Tort Cases

Gordon

2010

JBER

View full text Add to dashboard Cite

In this paper the basic responsibilities of a forensic economist are introduced. The role of the discount rate in this process is explained. Prior research on the choice of an appropriate discount rate is examined. The forensic economist must choose either a real rate of interest or a nominal rate. The choice is further compounded by the possible need to utilize a risk adjusted interested rate. The role of the variance and stochastic dominance is then examined. Different types of stochastic dominance are explained. It is found that the concept of stochastic dominance is a more general concept of risk than the variance and thus could be more accurate to use when evaluating future income streams in legal cases involving torts.

show abstract

The Risk and Reward of Investing a Lost Earnings Award: A Comparison of Stocks, Bonds, and Bills

Nieswiadomy¹

2012

Journal of Forensic Economics

View full text Add to dashboard Cite

This note analyzes the risk and reward of investing the present value of a 40-year worklife of lost earnings (of $10,000 per year), discounted using rates of returns on various portfolios. Eight portfolios are examined: 100% in Treasury bills; 100% in intermediate-term government bonds; 100% in corporate bonds; four mixtures of the S&P 500, intermediate-term government bonds, and Treasury bills; and 100% in the S&P 500. The rates of return on the portfolios and the growth rate in hourly earnings are randomly selected from a year in the 1965–2010 period. The results of 10,000 Monte Carlo simulations indicate that a 40-year portfolio will face “ruin” roughly 51% to 52% of the time for all portfolios. However, the portfolios differ greatly in the median year of ruin (if ruin occurs), ranging from a high of the 38th year for a 100% Treasury bills portfolio, to the 22nd year for a 100% S&P 500 portfolio. The percent of time that the award greatly enriches (with an ending balance over $1,000,000) the plaintiff varies greatly as well. A 100% S&P 500 portfolio enriches the plaintiff 36.8% of the time; a portfolio of 30% S&P 500, 30% intermediate government bonds, and 40% Treasury bills enriches 14.5% of the time; while a 100% Treasury bills portfolio will virtually never enrich.

show abstract

The “Income-Variance” Risk Factor and Jones & Laughlin v. Pfeifer Guidelines for the Calculation of Present Value

Abstract: No abstract available.

Cited by 4 publications

References 15 publications

Risk, Discounting, and the Present Value of Future Earnings

Risk, Discounting, and the Present Value of Future Earnings

The Role Of Stochastic Dominance In Determining Discount Rates In Tort Cases

The Risk and Reward of Investing a Lost Earnings Award: A Comparison of Stocks, Bonds, and Bills

Contact Info

Product

Resources

About