Alfred Rappaport

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Although exercise prices for executive stock options can be set either below or above the grant-date market price, in practice virtually all options are granted at the money. We offer an economic rationale for this apparent puzzle, by showing that pay-to-performance incentives for risk-averse, undiversified executives are typically maximized by setting(More)
company's value depends on its long-term ability to generate cash to fund value-creating growth and pay dividends to its shareholders. Even so, investment managers commonly base their stock selections on short-term earnings and portfolio tracking error rather than discounted cash flow (DCF)—the standard for valuing financial assets in well-functioning(More)
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