Title

Prudent Investing and Economic Damages: A Reply to Comments

Document Type

Article

Language

eng

Format of Original

9 p.

Publication Date

10-2009

Publisher

American Academy of Economic and Financial Experts (AAEFE)

Source Publication

Journal of Legal Economics

Source ISSN

1054-3023

Abstract

In an earlier paper in this journal (Breeden & Brush, 2008), the authors addressed contemporary prudent investor practices associated with modern portfolio theory and discussed their implications for forensic economists' calculations of the present value of future damages. This reply will address the key criticisms of the present authors' approach found in the two preceding comments in this issue, one by Philip Rushing, and the other by Larry DeBrock and Charles M. Linke. The comments of Rushing and DeBrock/Linke have raised challenges to the position that the discount rate used to discount future losses to present value should reflect the manner in which the lump sum award is likely to be invested. The present authors acknowledge that in making the determination of the appropriate risk-adjusted discount rate, both the volatility of equities markets and the need for periodic withdrawals from the invested funds are relevant considerations. Further research on these issues is clearly needed.

Comments

Journal of Legal Economics, Vol. 16, No. 1 (October 2009): 45-53. Publisher Link.

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