Time Preference and Speculative Stocks

Abstract

Different investors have different time preferences, which lead to different investment horizons. We claim that short-term investors have a stronger preference for speculative stocks featuring high volatility and high skewness than long-term investors do. It is supported by both of the theoretical analysis using Ingersoll and Jin’s (2013) realization utility model and the empirical analysis following Bali, Cakici and Whitelaw's (2011) methodology.

Keywords: Time preference; Speculative stocks; Realization utility; Volatility preference; Skewness preference

JEL Classification: G02, G12