Advanced Search
MyIDEAS: Login to save this paper or follow this series

Ranking Investment Projects

Contents:

Author Info

  • James E. Foster

    ()
    (Department of Economics, Vanderbilt University)

  • Tapan Mitra

    ()
    (Department of Economics, Cornell University)

Abstract

This paper describes conditions under which one investment project dominates a second project in terms of net present value, irrespective of the choice of the discount rate. The resulting partial ordering of projects has certain similarities to stochastic dominance. However, the structure of the net present value function leads to characterizations that are quite specific to this context. Our theorems use Bernstein's (1915) innovative results on the representation and approximation of polynomials, as well as other general results from the theory of equations, to characterize the partial ordering. We also show how the ranking is altered when the range of discount rates is limited or the rate varies period by period.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/pubs/VUECON/vu01-w07.pdf
File Function: First version, 2001
Download Restriction: no

Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0107.

as in new window
Length:
Date of creation: Apr 2001
Date of revision:
Handle: RePEc:van:wpaper:0107

Contact details of provider:
Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Investment projects; present value; stochastic dominance; polynomials; rate of return over cost; time dominance;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. J. Hirshleifer, 1958. "On the Theory of Optimal Investment Decision," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 329.
  2. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 173-77, January.
  3. Steinar Ekern., 1980. "Time Dominance Efficiency Analysis," Research Program in Finance Working Papers, University of California at Berkeley 105, University of California at Berkeley.
  4. Bawa, Vijay S., 1975. "Optimal rules for ordering uncertain prospects," Journal of Financial Economics, Elsevier, Elsevier, vol. 2(1), pages 95-121, March.
  5. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  6. Bohren, Oyvind & Hansen, Terje, 1980. " Capital Budgeting with Unspecified Discount Rates," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 82(1), pages 45-58.
  7. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198292975, October.
  8. Sen, Amartya, 1975. "Minimal conditions for monotonicity of capital value," Journal of Economic Theory, Elsevier, Elsevier, vol. 11(3), pages 340-355, December.
  9. Pratt, John W & Hammond, John S, III, 1979. "Evaluating and Comparing Projects: Simple Detection of False Alarms," Journal of Finance, American Finance Association, American Finance Association, vol. 34(5), pages 1231-42, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Murat Sertel & Arkadii Slinko, 2007. "Ranking Committees, Income Streams or Multisets," Economic Theory, Springer, Springer, vol. 30(2), pages 289-289, February.
  2. John Quah & Bruno Strulovici, 2011. "Discounting, Patience, and Dynamic Decision Making," Economics Series Working Papers 555, University of Oxford, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:van:wpaper:0107. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.