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The effect of mean reversion on investment under uncertainty

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  • Sarkar, Sudipto
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    File URL: http://www.sciencedirect.com/science/article/B6V85-47JCSXH-1/2/cc9ee6c415e3865327a644ace192e178
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

    Volume (Year): 28 (2003)
    Issue (Month): 2 (November)
    Pages: 377-396

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    Handle: RePEc:eee:dyncon:v:28:y:2003:i:2:p:377-396

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    Web page: http://www.elsevier.com/locate/jedc

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    References

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    1. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
    2. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April.
    3. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
    4. Sarkar, Sudipto, 2000. "On the investment-uncertainty relationship in a real options model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 219-225, February.
    5. Lund Diderik, 1993. "The Lognormal Diffusion Is Hardly an Equilibrium Price Process for Exhaustible Resources," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 235-241, November.
    6. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-85, December.
    7. Gilbert E. Metcalf & Kevin A. Hassett, 1995. "Investment Under Alternative Return Assumptions: Comparing Random Walks and Mean Reversion," NBER Technical Working Papers 0175, National Bureau of Economic Research, Inc.
    8. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
    9. Bhattacharya, Sudipto, 1978. "Project Valuation with Mean-Reverting Cash Flow Streams," Journal of Finance, American Finance Association, vol. 33(5), pages 1317-31, December.
    10. Zeira, Joseph, 1990. "Cost uncertainty and the rate of investment," Journal of Economic Dynamics and Control, Elsevier, vol. 14(1), pages 53-63, February.
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    Cited by:
    1. Abadie, Luis M. & Chamorro, José M., 2008. "Valuing flexibility: The case of an Integrated Gasification Combined Cycle power plant," Energy Economics, Elsevier, vol. 30(4), pages 1850-1881, July.
    2. Tsekrekos, Andrianos E., 2010. "The effect of mean reversion on entry and exit decisions under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 725-742, April.
    3. Neal Detert & Koji Kotani, 2012. "Real options approach to renewable energy investments in Mongolia," Working Papers EMS_2012_10, Research Institute, International University of Japan.
    4. Shih, Pai-Ta & Hung, Weifeng, 2008. "The overall effect of volatility on investment," Economics Letters, Elsevier, vol. 99(2), pages 324-327, May.
    5. Shibata, Takashi & Nishihara, Michi, 2010. "Dynamic investment and capital structure under manager-shareholder conflict," Journal of Economic Dynamics and Control, Elsevier, vol. 34(2), pages 158-178, February.
    6. Löfgren, Åsa & Millock, Katrin & Nauges, Céline, 2008. "The effect of uncertainty on pollution abatement investments: Measuring hurdle rates for Swedish industry," Resource and Energy Economics, Elsevier, vol. 30(4), pages 475-491, December.
    7. Lund, Diderik, 2005. "How to analyze the investment-uncertainty relationship in real option models?," Review of Financial Economics, Elsevier, vol. 14(3-4), pages 311-322.
    8. Gryglewicz, Sebastian & Huisman, Kuno J.M. & Kort, Peter M., 2008. "Finite project life and uncertainty effects on investment," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2191-2213, July.
    9. Angelov, Nikolay, 2006. "Structural breaks in Iron-Ore prices: The impact of the 1973 oil crisis," Working Paper Series 2006:11, Uppsala University, Department of Economics.
    10. Chu, Kai Cheung & Wong, Kit Pong, 2010. "Progressive taxation and corporate liquidation policies with mean-reverting earnings," Economic Modelling, Elsevier, vol. 27(3), pages 730-736, May.
    11. C. Y. Yiu & C. S. Tam, 2006. "Rational under-pricing in bidding strategy: a real options model," Construction Management and Economics, Taylor & Francis Journals, vol. 24(5), pages 475-484.
    12. Kit Wong, 2010. "On the neutrality of debt in investment intensity," Annals of Finance, Springer, vol. 6(3), pages 335-356, July.
    13. Andrianos Tsekrekos, 2013. "Irreversible exit decisions under mean-reverting uncertainty," Journal of Economics, Springer, vol. 110(1), pages 5-23, September.
    14. Shibata, Takashi, 2009. "Investment timing, asymmetric information, and audit structure: A real options framework," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 903-921, April.
    15. Davis, Graham A. & Cairns, Robert D., 2012. "Good timing: The economics of optimal stopping," Journal of Economic Dynamics and Control, Elsevier, vol. 36(2), pages 255-265.
    16. Strebulaev, Ilya A. & Whited, Toni M., 2012. "Dynamic Models and Structural Estimation in Corporate Finance," Foundations and Trends(R) in Finance, now publishers, vol. 6(1–2), pages 1-163, November.
    17. Chamorro Gómez, José Manuel & Abadie, Luis M., 2006. "Monte Carlo Valuation of natural gas investments," IKERLANAK 2006-25, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    18. Wong, Kit Pong, 2011. "Progressive taxation and the intensity and timing of investment," Economic Modelling, Elsevier, vol. 28(1-2), pages 100-108, January.

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