Real options and the Jorgensonian user cost of capital
Dixit and Pindyck (1994) claim that the Jorgensonian rule of investment (Jorgenson, 1963) does not hold in uncertain settings. This note shows that the validity of that claim depends crucially on the particular process chosen to describe the economic uncertainty. In fact, the Jorgensonian rule of investment holds in other real options models.
Volume (Year): 29 (2005)
Issue (Month): 3 (September)
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References listed on IDEAS
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- Heston, Steven L, 1993. " Invisible Parameters in Option Prices," Journal of Finance, American Finance Association, vol. 48(3), pages 933-47, July.
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- Peter Carr & Helyette Geman, 2002. "The Fine Structure of Asset Returns: An Empirical Investigation," The Journal of Business, University of Chicago Press, vol. 75(2), pages 305-332, April.
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