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We develop and analyze a model of a multi-stage investment project that captures many features of R&D ventures and start-up companies. An important feature these problems share is that the firm learns about the potential profitability of the project throughout its life, but that research and...
Persistent link: https://www.econbiz.de/10013224679
As a consequence of optimal investment choices, firms' assets and growth options change in predictable ways. Using a dynamic model, we show that this imparts predictability to changes in a firm's systematic risk, and its expected return. Simulations show that the model simultaneously reproduces:...
Persistent link: https://www.econbiz.de/10012472184
We develop and analyze a model of a multi-stage investment project that captures many features of R&D ventures and start-up companies. An important feature these problems share is that the firm learns about the potential profitability of the project throughout its life, but that research and...
Persistent link: https://www.econbiz.de/10012472068
Persistent link: https://www.econbiz.de/10000672841
The change in the cost of capital that results from a divestiture strategy can be closely approximated as a simple linear function of three parameters: (1) the fraction of socially conscious capital, (2) the fraction of targeted firms in the economy and (3) the return correlation between the...
Persistent link: https://www.econbiz.de/10014087583