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A patent race in a real options setting: Investment strategy, valuation, CAPM beta, and return volatility

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  • Meng, Rujing
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    File URL: http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00015-8
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    Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

    Volume (Year): 32 (2008)
    Issue (Month): 10 (October)
    Pages: 3192-3217

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    Handle: RePEc:eee:dyncon:v:32:y:2008:i:10:p:3192-3217
    Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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    1. Lukach, R. & Kort, P.M. & Plasmans, J., 2007. "Optimal R&D investment strategies under the threat of new technology entry," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 103-119, February.
    2. Jonathan B. Berk, 2004. "Valuation and Return Dynamics of New Ventures," Review of Financial Studies, Society for Financial Studies, vol. 17(1), pages 1-35.
    3. Pindyck, Robert S., 1993. "Investments of uncertain cost," Journal of Financial Economics, Elsevier, vol. 34(1), pages 53-76, August.
    4. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February.
    5. Kenneth L. Judd, 2003. "Closed-loop equilibrium in a multi-stage innovation race," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 673-695, March.
    6. Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
    7. Grenadier, Steven R, 1999. "Information Revelation through Option Exercise," Review of Financial Studies, Society for Financial Studies, vol. 12(1), pages 95-129.
    8. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-985, December.
    9. Craine, Roger, 1988. "Risky business : The allocation of capital," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 135-135, March.
    10. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
    11. Caballero, Ricardo J & Pindyck, Robert S, 1996. "Uncertainty, Investment, and Industry Evolution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 641-662, August.
    12. Roger Craine., 1988. "Risky Business: The Allocation of Capital," Economics Working Papers 8873, University of California at Berkeley.
    13. Lambrecht, Bart & Perraudin, William, 2003. "Real options and preemption under incomplete information," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 619-643, February.
    14. Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 1-21.
    15. Cochrane, John H., 2005. "The risk and return of venture capital," Journal of Financial Economics, Elsevier, vol. 75(1), pages 3-52, January.
    16. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
    17. Robert Novy-Marx, 2007. "An Equilibrium Model of Investment Under Uncertainty," Review of Financial Studies, Society for Financial Studies, vol. 20(5), pages 1461-1502, 2007 29.
    18. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 429-436.
    19. Abel, Andrew B., 1984. "The effects of uncertainty on investment and the expected long-run capital stock," Journal of Economic Dynamics and Control, Elsevier, vol. 7(1), pages 39-53, February.
    20. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    21. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
    22. Craine, Roger, 1988. "Risky Business: The Allocation of Capital," Department of Economics, Working Paper Series qt5f50z40s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    23. Nalin Kulatilaka & Enrico C. Perotti, 1998. "Strategic Growth Options," Management Science, INFORMS, vol. 44(8), pages 1021-1031, August.
    24. Christopher Harris & John Vickers, 1985. "Perfect Equilibrium in a Model of a Race," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 193-209.
    25. Abel, Andrew B, 1985. "A Stochastic Model of Investment, Marginal q and the Market Value of the Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 305-322, June.
    26. Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 691-721.
    27. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-233, March.
    28. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
    29. Lihui Lin, 2007. "Strategic options and firm value," Managerial Finance, Emerald Group Publishing, vol. 33(11), pages 893-903, October.
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