Author: Natasa BilkicPublisher:
ISBN:
Category :
Languages : en
Pages : 284
Book Description
Essays on Investment Decisions Under Large Uncertainty
Author: Natasa BilkicEssays on Investment Decisions Under Uncertainty
Author: Yongma MoonThree Essays on Investment Under Uncertainty
Author: Gaurav Atreyi KankanhalliPublisher:
ISBN:
Category :
Languages : en
Pages : 199
Book Description
In this dissertation, I explore how economic agents conduct their investment decisions under uncertainty. Each of the three chapters empirically tests predictions from real-options frameworks of investment under uncertainty, shedding light on novel dimensions of agents' investment responses to uncertainty. In the first chapter, I study how the startup ecosystem responds to uncertainty. In the second chapter, I empirically measure the international transmission of uncertainty by examining US firms' investment responses to uncertainty induced by the 2016 Brexit Referendum. In the third chapter, I examine how uncertainty affects not only the level, but also the composition, of firms' capital stock using data on global shipping firms' investment and disinvestment decisions. Chapter 1 shows that economic uncertainty boosts dynamism among US startups. I introduce news- and survey-based measures of startup-relevant uncertainty and find that uncertainty is associated with net firm creation, and net job creation among young firms. I identify the channel by demonstrating, in a real-options framework, that venture capitalists (VCs) adjust their portfolios to take advantage of uncertainty. In contrast to mature firms delaying investment when facing uncertainty, VCs increase their investment spending during periods of heightened uncertainty, but do so by funding a large number of startups at low valuations. Critically, these dynamics play out solely at the earliest funding stages, implying greater experimentation by VCs. Buoyed by increased VC funding, startups accelerate their investment in technology and labor, producing more innovation and gaining greater traction. Looking at eventual outcomes, I provide evidence that startups receiving funding during high uncertainty periods are more likely to either fail or have exits with high multiples. My results point to uncertainty playing an important role in spurring "creative destruction" by stimulating risky startup activity in the economy. Chapter 2 (joint with Murillo Campello, Gustavo S. Cortes, and Fabricio D'Almeida) shows that the 2016 Brexit Referendum led American corporations to cut jobs and investment within US borders. Using establishment-level data, we document that these effects were modulated by the degree of reversibility of capital and labor. American job losses were particularly pronounced in industries with less skilled and more unionized workers. UK-exposed firms with less redeployable capital and high input-offshoring dependence cut investment the most. Data on the near-universe of US establishments also point to measurable, negative effects on establishment turnover (openings and closings). Our results demonstrate how foreign-born political uncertainty is transmitted across international borders, shaping domestic capital formation and labor allocation. Chapter 3 (joint with Murillo Campello and Hyunseob Kim) studies how economic uncertainty affects corporate asset composition and productivity using near-universe data on shipping firms' new orders, secondary-market transactions, and demolition of ships. Using a real-options framework, we show that shipping firms curtail both the acquisition and disposal of ships in response to heightened uncertainty. Critically, this mechanism operates primarily through cuts in new ship orders and demolition of older vessels -- decisions that are harder to reverse vis-a-vis deals in the used ship market. We use the escalation in Somali pirate attacks from 2009-2011 as a plausibly exogenous shock to uncertainty and find consistent results. The dynamics we identify are more pronounced when secondary ship markets are less liquid, as firms face stronger incentives to delay their decisions. Our results are novel in showing that uncertainty hampers "creative destruction" among mature firms in which these firms adopt technological innovation emobdied in newer capital and dispose of old-vintage capital.
Risk Taking in Investment Decisions
Author: Tim JägerThe Investment Decision Under Uncertainty
Author: Donald Eugene FarrarPublisher:
ISBN:
Category : Capital investments
Languages : en
Pages : 112
Book Description
Market and Professional Decision-making Under Risk and Uncertainty
Author: Erick DavidsonPublisher:
ISBN:
Category : Dynamic programming
Languages : en
Pages : 107
Book Description
Abstract: This dissertation explores decision making under risk and uncertainty by professionals and markets composed of professionals. Both essays use empirical data from some of the most competitive economic environments imaginable. The first essay looks at market prices resulting from the sum of both professional and lay choices while the second analyzes the individual choices of professional gamblers. Both essays propose a theoretical framework to not just positively identify what professionals do, but also prescribe normatively what they should do. In both cases, the two are found to be different. The first essay, Market Response to Risk and Uncertainty, 2004 Hurricane Forecasts, develops a simple function to explain insurance losses from hurricanes as a function of short-term forecasts. After demonstrating the accuracy of the function in explaining 2004 insurance claims, the remainder of the essay looks at the stock market's use of these forecasts in pricing insurer and US economy risk. Despite causing billions in damages, both hurricanes and hurricane forecasts are found to have only marginal impacts on financial markets. Surprisingly, markets fail to make efficient use of hurricane forecasts in pricing both insurer and general market exposure to hurricane risk. A potential explanation for market inefficiency around hurricane information is that, like researchers, financial actors may be confounding uncertainty for unpredictability. The second essay, Know When to Hold'em, examines a specific decision within a highly popular, high-stakes version of poker. Like financial markets analyzed in the first essay, professional gamblers must make risky decisions with uncertain probabilities of success. Gamblers are found to be both overly conservative in their choices and overly confident in their abilities to predict uncertain outcomes. A simple statistical model that generalizes across situations to form a naïve probability of having the best cards, is found to be as effective in decision making as players' true expectations of winning. Additionally, a dynamic theoretical model is presented in order to show professional divergence from risk-neutral expected profit maximization in the credit constrained world of tournament poker. Interestingly the value function, derived from this model, is equivalent to an optimal stock price of a poker player.
Risk, Uncertainty and Profit
Author: Frank H. KnightPublisher: Cosimo, Inc.
ISBN: 1602060053
Category : Business & Economics
Languages : en
Pages : 401
Book Description
A timeless classic of economic theory that remains fascinating and pertinent today, this is Frank Knight's famous explanation of why perfect competition cannot eliminate profits, the important differences between "risk" and "uncertainty," and the vital role of the entrepreneur in profitmaking. Based on Knight's PhD dissertation, this 1921 work, balancing theory with fact to come to stunning insights, is a distinct pleasure to read. FRANK H. KNIGHT (1885-1972) is considered by some the greatest American scholar of economics of the 20th century. An economics professor at the University of Chicago from 1927 until 1955, he was one of the founders of the Chicago school of economics, which influenced Milton Friedman and George Stigler.
Investment Decisions Under Uncertainty
Author: Reginald Ansell Day EgertonPublisher:
ISBN:
Category : Hypothesis
Languages : en
Pages : 100
Book Description
Essays on Economic Decisions Under Uncertainty
Author: Jacques DrèzePublisher: CUP Archive
ISBN: 9780521386975
Category : Business & Economics
Languages : en
Pages : 460
Book Description
Professor Dreze is a highly respected mathematical economist and econometrician. This book brings together some of his major contributions to the economic theory of decision making under uncertainty, and also several essays. These include an important essay on 'Decision theory under moral hazard and state dependent preferences' that significantly extends modern theory, and which provides rigorous foundations for subsequent chapters. Topics covered within the theory include decision theory, market allocation and prices, consumer decisions, theory of the firm, labour contracts, and public decisions.
Risk, Uncertainty and Profit
Author: Frank Hyneman KnightPublisher:
ISBN:
Category : Profit
Languages : en
Pages : 408
Book Description