households and lower investment by firms, and hence leads to lower aggregate investment and growth. This paper argues that … although risk can be measured, uncertainty cannot be measured. Even though risk can be measured, a simple symmetric measure … attempt at "measuring" risk or (fundamental) uncertainty is flawed. …

This paper deals with capital budgeting decisions under uncertainty. We present an Aggregate Return On Investment (AROI … which, compared with the risk-adjusted cost of capital, correctly signals wealth creation. For choosing between two mutually … exclusive projects, we derive an incremental AROI and an incremental risk-adjusted cost of capital, by means of which two …

In a model of mutual fund investor learning about managerial ability, we investigate how investment decisions depend on …

opposite of what is appropriate for the decision. We illustrate the conflict by studying multi-period investment problems. The …-period investments with negative risk premia can be profitable, there can be infinite demand for risky securities by risk averse … investors, settings exist where risk averse investors should not diversify, and demand for mutual funds with negative alphas may …

In this paper, we study an irreversible investment problem under Knightian uncertainty. In a general framework, in … investment plan, and derive necessary and sufficient conditions for optimality. This allows us to construct the optimal policy in … - where risk is driven by a geometric Brownian motion and Knightian uncertainty is realized through a so-called "k …

We examine whether regulatory uncertainty encourages firms to delay capital investment decisions. The case of … uncertainty and then, just as dramatically, increased investment beginning in 2000 due to the resolution of some regulatory …

without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process …, reflecting an investor's dynamic preference. We show that the market risk premium and the utility risk premium jointly determine …-form formulas for the optimal investment strategies are given in the special settings of the CRRA preference …

Real option valuation has traditionally been concerned with investment under project value uncertainty while assuming …. Ambiguity aversion is found to have dual effects that are similar, but distinct from risk aversion. Agent's are found to … uncertainty in the investment or a hedging asset …

markets, such as liquidity dry-ups, portfolio inertia, and negative risk premia …

In this paper we investigate how volatility shocks influence investors' perceptions about a stock's risk, its future … development, and investors' investment propensity. We ran artefactual field experiments with two participant pools (finance … professionals and students) that had to take investment decisions, differing in (i) the direction of the shock (down, up, straight …