'Time to build, option value and investment decisions': a comment

• 成果类型: Article
• 署名作者: Milne, A; Whalley, AE
• 署名单位: City St Georges, University of London; University of Warwick
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(00)00043-X
• 发表日期: 2000
• 页码: 325-332
• 关键词: irreversible investment; Time to build

摘要

We correct the analysis of the model of time to build in Majd and Pindyck (1987 Journal of Financial Economics 18, 7-27) for the omission of an essential optimality condition, Our analysis reveals an additional insight: long times to build reduce the effects of increased project value volatility (i,e., higher investment thresholds) in comparison to standard real option models of investment under uncertainty, where investment is instantaneous. Thus, a 'naive' NPV rule can sometimes be an appropriate initial guide to investment. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classification: C63; D92.