The Impact of Multiple Investment Opportunities on the Initial Investment

Standard real options theory addresses a firm’s investment problem from the perspective of a single investment, ignoring the impact of multiple investment options. This leads to opportunity loss, ultimately foregoing potential value enhancement for the firm. Intriguingly, our results suggest that by neglecting multiple investment options, firms may lose the potential value of size similar to the gains. Such loss in potential value gains is specifically more noticeable in low demand levels when uncertainty, investment cost differences, and discount factors are relatively low. Our findings indicate that considering multiple investment options influences the timing of investments. Specifically, each subsequent investment option reduces the value of waiting, leading to earlier investment undertakings

The Impact of Multiple Investment Opportunities on the Initial Investment

Standard real options theory addresses a firm’s investment problem from the perspective of a single investment, ignoring the impact of multiple investment options. This leads to opportunity loss, ultimately foregoing potential value enhancement for the firm. Intriguingly, our results suggest that by neglecting multiple investment options, firms may lose the potential value of size similar to the gains. Such loss in potential value gains is specifically more noticeable in low demand levels when uncertainty, investment cost differences, and discount factors are relatively low. Our findings indicate that considering multiple investment options influences the timing of investments. Specifically, each subsequent investment option reduces the value of waiting, leading to earlier investment undertakings

Real Options Models without Single-Investment Threshold Behavior

This paper investigates real options models that violate the assumption of positive persistence of uncertainty. Without this fundamental assumption, existing methodologies are inadequate to address the firm's investment problem. To tackle this issue, we introduce a discrete-time version of a real options model and employ reinforcement learning, specifically Q-learning, to derive the optimal solution. Our findings reveal that in scenarios where the assumption of positive persistence of uncertainty is violated, the firm's investment behavior can exhibit disconnected investment regions

Real Options Models without Single-Investment Threshold Behavior

This paper investigates real options models that violate the assumption of positive persistence of uncertainty. Without this fundamental assumption, existing methodologies are inadequate to address the firm's investment problem. To tackle this issue, we introduce a discrete-time version of a real options model and employ reinforcement learning, specifically Q-learning, to derive the optimal solution. Our findings reveal that in scenarios where the assumption of positive persistence of uncertainty is violated, the firm's investment behavior can exhibit disconnected investment regions

The effect of macroeconomic variables on the stock market index of the Tehran stock exchange

This paper examines the relationship between stock market index and macroeconomic policies (Fiscal and Monetary) on Iran's economy using quarterly data in the period 1999-2013. This study employed cointegration test and vector autoregressive models (VAR) to examine relationships between the stock market index and the macroeconomic variables. The empirical results reveal that a positive money shock can increase stocks return. According to impulse responses, the government expenditure had a slight impact on stocks return in the short term. But the government expenditure has a positive effect on exchange index in long run. Also the effect of taxes on the stock's price index is negative, so that it reaches its maximum level after the third lag and then alleviates. The GDP shock has positive effect on the stock's price index. Increase in production level leads to increase in earnings and profitability, leading to a positive response from stocks index. Therefore the results showed that the macroeconomic variables such as inflation, exchange rate and GDP have significant effects on Tehran exchange price index. So the hypothesis that the improving economic factors can have a useful role in the booming capital market is confirmed. Also the effect of fiscal policy factors such as tax revenues and government expenditures is more than monetary policy factors on stock returns

Strategic investment under uncertainty in a triopoly market:Timing and capacity choice

This paper analyzes investment decisions under uncertainty in a triopoly market. We determine the investment timing and the investment size of the firms under the condition that firms hold an asymmetric cost structure. We build on Shibata (European Journal of Operational Research, 2016) who solves this problem with exogenous investment size. He finds that the firm with the lowest cost does not always enter the market as the first investor. However, we obtain that, when extending the analysis for capacity choice, the firm with the lowest cost always enters first in the triopoly market. The designed algorithm, which employs the bisection method at several steps to solve this model, is of value of its own as it can be more generally applied to investment problems in markets with several firms and multiple investment opportunities