Many economic variables of interest exhibit a tendency to revert to predictable long-run levels. However, mean reverting processes are rarely used in investment models in the literature. In most models, geometric Brownian motion processes are used for tractability. In this paper, a firm's entry...

This paper presents a proposal for evaluating real options. The existing models are not widely used by corporate managers as they are formally complex, rather difficult to understand and rest on strong implicit assumptions. We propose a possible alternative by using a fuzzy expert system that...

In project appraisal under uncertainty, the economic reliability of a measure of financial efficiency depends on its strong NPV-consistency, meaning that the performance metric (i) supplies the same recommendation in accept-reject decisions as the NPV, (ii) ranks competing projects in the same...

Inspired by the initial success and eventual failure of Einar Aas' trading strategy exploiting dynamical patterns in the spread between Nordic and German electricity futures, we investigate the question whether there is evidence for possible arbitrage from engaging in both markets simultaneously...

We examine the impact of financial statement comparability on managers' use of corporate resources. Using the comparability measures of De Franco, Kothari, and Verdi (2011) as proxies for financial statement comparability, we find that, as comparability increases, corporate cash holdings are...

Many U.S. corporate bonds are either callable or convertible. While callable bonds provide a higher coupon to bondholders in exchange for a firm's repurchase option of its claim, convertible bonds offer investors the option to exchange a firm's debt to equity. This paper analyzes the choice...

We analyze the optimal investment strategy of a firm that can complete a project either in one stage at a single freely chosen time point or in incremental steps at distinct time points. The presence of economies of scale gives rise to the following trade-off: lumpy investment has a lower total...

The real options literature has provided new insights on how to manage irreversible capital investments whose payoffs are always uncertain. Two of the most important predictions from such theory are: (i) greater risk delays a firm's investment timing, and (ii) greater risk increases the option...

Behavioral finance has emerged as a new paradigm in financial economics. It deals primarily with the influences of psychology on market finance and with market inefficiencies. The field of psychology, already very present in organizational psychology and decision-making, is slowly opening up...

This paper investigates real options behavior in capital budgeting decisions using a firm-level panel data set of U.S. companies in the manufacturing sector. Specifically, this paper looks are the relationship between the firm's investment to capital ratio and total firm uncertainty, measured as...