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Author: Robert S. Pindyck Publisher: World Bank Publications ISBN: Category : Capital investments Languages : en Pages : 58
Book Description
Irreversible investment is especially sensitive to such risk factors as volatile exchange rates and uncertainty about tariff structures and future cash flows. If the goal of macroeconomic policy is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates.
Author: Robert S. Pindyck Publisher: World Bank Publications ISBN: Category : Capital investments Languages : en Pages : 58
Book Description
Irreversible investment is especially sensitive to such risk factors as volatile exchange rates and uncertainty about tariff structures and future cash flows. If the goal of macroeconomic policy is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates.
Author: Robert K. Dixit Publisher: Princeton University Press ISBN: 1400830176 Category : Business & Economics Languages : en Pages : 484
Book Description
How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending. This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.
Author: Robert S. Pindyck Publisher: ISBN: Category : Languages : en Pages : 75
Book Description
Most investment expenditures have two important characteristics: First, they are largely irreversible; the firm cannot disinvest, so the expenditures are sunk costs. Second, they can be delayed, allowing the firm to wait for new information about prices, costs, and other market conditions before committing resources. An emerging literature has shown that this has important implications for investment decisions, and for the determinants of investment spending. Irreversible investment is especially sensitive to risk, whether with respect to future cash flows, interest rates, or the ultimate cost of the investment. Thus if a policy goal is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates. This paper presents some simple models of irreversible investment, and shows how optimal investment rules and the valuation of projects and firms can be obtained from contingent claims analysis, or alternatively from dynamic programming. It demonstrates some strengths and limitations of the methodology, and shows how the resulting investment rules depend on various parameters that come from the market environment. It also reviews a number of results and insights that have appeared in the literature recently, and discusses possible policy implications.
Author: Ben Bernanke Publisher: ISBN: Category : Business cycles Languages : en Pages : 24
Book Description
The optimal timing of real investment is studied under the assumptions that investment is irreversible and that new information about returns is arriving over time. Investment should be undertaken in this case only when the costs of deferring the project exceed the expected value of information gained by waiting. Uncertainty, because it increases the value of waiting for new information, retards the current rate of investment. The nature of investor's optimal reactions to events whose implications are resolved over time is a possible explanation of the instability of aggregate investment over the business cycle
Author: Darrell Duffie Publisher: Princeton University Press ISBN: 1400829208 Category : Business & Economics Languages : en Pages : 488
Book Description
This is a thoroughly updated edition of Dynamic Asset Pricing Theory, the standard text for doctoral students and researchers on the theory of asset pricing and portfolio selection in multiperiod settings under uncertainty. The asset pricing results are based on the three increasingly restrictive assumptions: absence of arbitrage, single-agent optimality, and equilibrium. These results are unified with two key concepts, state prices and martingales. Technicalities are given relatively little emphasis, so as to draw connections between these concepts and to make plain the similarities between discrete and continuous-time models. Readers will be particularly intrigued by this latest edition's most significant new feature: a chapter on corporate securities that offers alternative approaches to the valuation of corporate debt. Also, while much of the continuous-time portion of the theory is based on Brownian motion, this third edition introduces jumps--for example, those associated with Poisson arrivals--in order to accommodate surprise events such as bond defaults. Applications include term-structure models, derivative valuation, and hedging methods. Numerical methods covered include Monte Carlo simulation and finite-difference solutions for partial differential equations. Each chapter provides extensive problem exercises and notes to the literature. A system of appendixes reviews the necessary mathematical concepts. And references have been updated throughout. With this new edition, Dynamic Asset Pricing Theory remains at the head of the field.
Author: Kiyohiko G. Nishimura Publisher: Springer ISBN: 4431559035 Category : Business & Economics Languages : en Pages : 341
Book Description
This is the first book to investigate individual’s pessimistic and optimistic prospects for the future and their economic consequences based on sound mathematical foundations. The book focuses on fundamental uncertainty called Knightian uncertainty, where the probability distribution governing uncertainty is unknown, and it provides the reader with methods to formulate how pessimism and optimism act in an economy in a strict and unified way. After presenting decision-theoretic foundations for prudent behaviors under Knightian uncertainty, the book applies these ideas to economic models that include portfolio inertia, indeterminacy of equilibria in the Arrow-Debreu economy and in a stochastic overlapping-generations economy, learning, dynamic asset-pricing models, search, real options, and liquidity preferences. The book then proceeds to characterizations of pessimistic (ε-contaminated) and optimistic (ε-exuberant) behaviors under Knightian uncertainty and people’s inherent pessimism (surprise aversion) and optimism (surprise loving). Those characterizations are shown to be useful in understanding several observed behaviors in the global financial crisis and in its aftermath. The book is highly recommended not only to researchers who wish to understand the mechanism of how pessimism and optimism affect economic phenomena, but also to policy makers contemplating effective economic policies whose success delicately hinges upon people’s mindsets in the market. Kiyohiko Nishimura is Professor at the National Graduate Institute for Policy Studies (GRIPS) and Professor Emeritus and Distinguished Project Research Fellow of the Center for Advanced Research in Finance at The University of Tokyo. Hiroyuki Ozaki is Professor of Economics at Keio University.
Author: Seungho Jung Publisher: International Monetary Fund ISBN: 1557759677 Category : Business & Economics Languages : en Pages : 36
Book Description
We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.
Author: Eduardo S. Schwartz Publisher: MIT Press ISBN: 9780262693189 Category : Business & Economics Languages : en Pages : 890
Book Description
The study of investment under uncertainty was stagnant for several decades until developments in real options revitalized the field. The topics covered in this book include the reasons behind the under-investment programme.
Author: Robert S. Pindyck
Author: Robert S. Pindyck
Author: Robert K. Dixit
Author: Robert S. Pindyck
Author: Ben Bernanke
Author: Darrell Duffie
Author: Luis H. R. Alvarez
Author: Kiyohiko G. Nishimura
Author: Seungho Jung
Author: Yigal Menashe
Author: Eduardo S. Schwartz