Price uncertainty and the effect of capital costs in a point in-point out inventory investment

This paper analyzes a point in-point out inventory investment under price uncertainty. The optimal quantity is determined by maximizing the expected value of the investor's risk preference function, which is a function of profit. Using an exponential risk preference function, the adjustment in the optimal quantity stemming from a change in the interest rate is investigated. The main conclusion is that the sign of the adjustment depends both on how profit is expressed and on the type of price distribution applied. Contrary to what is assumed in conventional managerial control practices, a rise in the interest rate might lead to an increase in the optimal quantity when present value serves as a measure of profit.     

A model of information diffusion with asymmetry and confidence effects in financial markets

We present a model of multi-period continuous information diffusion in financial markets. We show that price and trading volume exhibit asymmetric term structures to information flow, where the diffusion rate accelerates more slowly at short horizons than it decelerates at long horizons. Bounded rationality is modelled by an endogenous trader confidence index which declines as stock price information becomes noisier, where lower confidence translates into lower trading volume and slower price accretion. Information diffusion slows and asymmetries are accentuated as traders lose confidence in information accuracy. Our empirical findings support the model's predictions of asymmetric momentum patterns and confidence effects.     

NONPARAMETRIC ESTIMATION OF ENTRY COST IN FIRST‐PRICE PROCUREMENT AUCTIONS

In this paper, I investigate Samuelson's low‐price auction model with entry costs. The model's equilibrium implies that the distribution of bids is truncated at the threshold for participation. I use the model to estimate the cost of participation in Michigan highway procurement auctions. The null hypothesis of zero entry costs is rejected. Using my empirical results, I then construct an estimate of the optimal auction, which employs regular policy tools such as entry fees. Finally, I demonstrate the savings that the Michigan government could have made on payments if optimal auctions had been employed. Copyright © 2012 John Wiley & Sons, Ltd.     

The effect of oil price uncertainty on corporate investment in the presence of growth options: Evidence from listed companies in China (1998–2019)

We empirically investigate the effect of oil price uncertainty on corporate investment in the presence of growth options using the financial data of listed firms in China from 1998 to 2019. We reveal three key findings in this paper. First, we find that oil price uncertainty has a U-shaped nonlinear effect on corporate investment. In periods of low uncertainty, oil price uncertainty negatively influences corporate investment. However, in periods of high uncertainty, oil price uncertainty positively influences corporate investment. Second, research has found that the U-shaped nonlinear effect is moderated by the irreversibility and growth opportunities of investment decisions. Third, further analyses reveal that this U-shaped nonlinear effect can be changed by a firm’s characteristics. Specifically, this nonlinear effect can only be observed in non-state-owned enterprises and small firms. We test the robustness of our findings and propose several policy suggestions.     

Self-organization and the persistence of noise in financial markets

A dynamic model of financial markets with learning is demonstrated to produce a self-organized system that displays critical behavior. The price contains private information that traders learn to extract and employ to forecast future value. Since the price reflects the beliefs of the traders, the learning process is self-referencing. As the market learns to correctly extract information from the price, the market deemphasizes private information. Despite the convergence of the model towards the parameters producing efficiency, pricing deviations remain constant due to the increased sensitivity of the price to small errors in information extraction produced by the model's own convergence.     

股票交易的数学模型分析

股票投资要慎重决策,公司的基本面即公司的发展状况是股票价格的重要依据。用预测公司的每股利润的增长率来预测股价的未来走势,建立相关的数学模型,算出股价变动期望值与方差,依据数值的大小来决策买入卖出,这是较为可行的股票交易决策方法。同时也可参考成交量的变化来决策买入卖出的时机。     

What do We Know About Investment Under Uncertainty?

Recent theoretical developments relating to investment under uncertainty have highlighted the importance of irreversibility for the timing of investment expenditures and their expected returns. This has subsequently stimulated a growing empirical literature which examines uncertainty and threshold effects on investment behaviour. This paper presents a review of this literature. A variety of methods have been used to investigate the empirical implication of irreversibility in investment, the majority focusing on the relationship between investment flows and proxy measures of uncertainty. A general conclusion is that increased uncertainty, at both aggregate and disaggregate levels, leads to lower investment rates. This suggests that there is an irreversibility effect, under which greater uncertainty raises the value of the 'call option' to delay a commitment to investment. This effect appears to dominate any positive impact on investment arising from the fact that greater uncertainty, under certain circumstances, increases the marginal profitability of capital. The methods used raise a number of issues which call into question the reliability of the findings, and these are addressed in the paper. However, if such irreversibility effects are present, then their omission from traditional investment models casts doubt on the efficacy of such specifications. JEL Classification: D81, D92, E22     

The effects of uncertainty on investment and the expected long-run capital stock

This paper examines the effects of output price uncertainty on the optimal investment behavior of a risk-neutral competitive firm with a constant returns to scale production function. In the presence of convex costs of adjustment, investment is an increasing function of q, the shadow price of capital. Given the current price of output, we find that increased uncertainty will raise the current rate of investment. Increased uncertainty will also increase the expected long-run capital stock if the price of output is serially uncorrelated. However, if the price of output is serially correlated, then the direction of the effect of increased uncertainty on the expected long-run capital stock depends on the curvature of the marginal adjustment cost function. In this case, we obtain results which are directly opposite of the results in the literature and we locate the flaw in the existing analysis.     

对政府投资项目工程量清单控制价编审的分析

财政部门是政府投资的出资人,投资控制是财政部门在项目投资管理工作中的重要内容,工程量清单控制价编审又是投资控制中控制造价、节约财政资金最有效的方式方法。通过对当前政府投资项目工程量清单控制价编审的分析,提出了政府投资项目工程量清单控制价的编审要点,为政府部门做好投资项目的造价管理和提高投资效益提供一些参考。     

A capital accumulation model of the workers' enterprise

This article formulates a capital accumulation model of the workers' enterprise in which the standard adjustment-costs theory of investment is introduced into Sertel's framework. The existence, uniqueness and local stability of the steady state are shown to be established under mild conditions and the long-run effects of changes in the price of output, the external wage rate and the interest rate on the volume of capital and the size of membership are examined.     

Optimal harvesting under resource stock and price uncertainty

We analyze partial and complete depletion harvesting policy under resource stock and price uncertainty and risk neutrality. We state a set of weak conditions under which the optimal policy can be characterized by a single threshold and show that the value can be expressed in a separable form where price volatility affects the value through the risk adjusted growth rate. Both higher price and stock volatility decrease the value when the correlation between the driving Brownian motions is negative. With no correlation the optimal policy is independent of price volatility while higher stock volatility increases the harvesting threshold.     

中国多机制门限金融状况指数编制及应用

研究目标：实证编制及应用中国多机制门限金融状况指数(MR-TFCI)。研究方法：通过拓展构建了多机制门限向量自回归(MR-TVAR)模型和MR-TFCI的多机制门限编制公式，从经济增长(RG)目标出发，选取5个金融变量，测算四个机制的广义脉冲响应函数值，编制了中国MR-TFCI，并比较其与 2机制门限FCI(2R-TFCI)和1机制线性FCI(1R-FCI)的优劣。研究发现：与2R-TFCI和1R-FCI相比，MR-TFCI是RG更优的先行、相关性、因果性和预测指标；中国货币政策调控经济增长的效应和传导渠道具有门限特征；中国货币政策调控经济增长的方式类型是价格和数量结合型的。研究创新：构建了MR-TVAR模型和MR-FCI的多机制门限编制公式，编制了首个多机制门限金融状况指数。研究价值：为中国政府部门实施货币政策和实体经济进行投融资决策提供了科学决策依据。     

Investment decisions and debt financing under information uncertainty

This study examines how information uncertainty influences investment decisions. In contrast to prior studies, which assume no information uncertainty, our model includes a discrepancy in valuing debt between shareholders and debtholders at the time of debt issuance. We derive the values of corporate securities and the optimal investment threshold and coupon under information uncertainty. We show that compared with the absence of information uncertainty, debtholders value debt less than shareholders do, and hence, shareholders should contribute more investment funds. Debt financing restraints due to information uncertainty lead to delayed investment. We find that information uncertainty plays a mitigating role in shareholder-debtholder conflicts over investment policy. Moreover, the information uncertainty costs that shareholders incur increase sharply with the level of information uncertainty.     

Stochastic interest rates under rational inattention

This paper introduces state uncertainty due to information-processing constraints into the Vasicek model to examine the impacts of rational inattention. By exploiting the term structure of interest rates, we derive closed-form solutions for the subjective bond price and the corresponding bond yield and find that uncertainty induced by informational frictions plays vital roles in undervaluing the bond price and overestimating the bond yield. Furthermore, we clarify the applications of interest rate dynamics under rational inattention and generate the following results: (i) there is an ambiguous relationship between the investor’s channel capacity and option price; (ii) an increase in state uncertainty via a change in the degree of channel capacity is likely to accelerate investment.     

The risk spillover between China’s economic policy uncertainty and commodity markets: Evidence from frequency spillover and quantile connectedness approaches

Based on the frequency spillover method extended by Baruník and Křehlík (2018), we explore the risk spillover relationship between China’s economic policy uncertainty (CNEPU) and commodity futures in different frequency domains with daily settlement price data of 14 commodity futures in China. The results show that the risk spillover relationship between CNEPU and the commodity market mainly occurs in the short term. Quantile connectedness results show that economic policy uncertainty, which mainly plays the role of risk transmitter, is more closely related to the commodity market during the market boom and recession. Soybeans, soybean meal, and corn have shown high investment value in the process of market recovery, which is exposed to less risk spillover from policy uncertainty. Finally, the economic crisis with different characteristics will have specific impacts on asymmetric risk spillovers based on certain impact mechanisms.     

汇率和需求不确定下跨国投资决策的实物期权分析

在对实物期权理论和跨国投资相关文献研究基础上,分析企业在汇率和需求不确定条件下跨国投资的风险和期权特征,构建了基于实物期权思想的跨国投资决策模型。通过数值求解,分析了跨国投资情况下,企业拥有的实物期权价值。     

The relationship between forecast dispersion and forecast uncertainty: Evidence from a survey data—arch model

This paper examines empirically the relationship between measures of forecast dispersion and forecast uncertainty from data on inflation expectations from the Livingston survey series and the Survey Research Center (SRC) survey series. Because the survey series do not provide probabilistic forecasts of inflation, we derive measures of inflation uncertainty by modelling the conditional variance of the inflation forecast errors from the survey series as an autoregressive conditional heteroscedastic (ARCH) process. The analysis is complicated by the fact that the overlap of forecast horizons for the survey series does not preclude the model's disturbance terms from displaying autocorrelation, and also places a restriction on the specification for the ARCH measures of inflation uncertainty. We estimate the model using Hansen's (1982) generalized method of moments (GMM) procedure to account for the presence of serial correlation and conditional heteroscedasticity in the disturbance terms. The results generally support the hypothesis that the measures of forecast dispersion across survey respondents are positively and statistically significantly associated with the measures of inflation uncertainty. However, the appropriateness of using forecast dispersion measures as proxies for inflation uncertainty is sensitive to the choice of the survey series.     

Supplier incentives and resource constraints under uncertainty

Procurement in environments of cost uncertainty and asymmetric information require special arrangements such as the linear incentive contract. Usually the buyer is motivated to make investments that can relieve temporary supplier resource constraints during the procurement. Special problems arise, however, due to interactions between investments in suppliers and the risk-incentive trade-off achieved by the incentive contract. A cost signaling model is proposed to overcome these problems, where a supplier offers an equity share in the profit from the incentive contract to the buyer in return for a priori investment. The equity share signals the supplier's private cost information, and forms the basis for the buyer's investment decision. Under equilibrium the buyer can expect to recover the entire amount provided to the supplier through his or her share of the profit.     

Does organization capital matter? An analysis of the performance implications of CEO power

Chief executive officer (CEO) power reflects the ability of the CEO to influence the firm's decision-making. Whether the CEO of the firm could manage the firm’s investment assets to support maximizing the efficiency of resource allocation is an important issue. As previous studies found, organization capital is a key intangible asset that improves the firm’s production efficiency and affects long-term performance. This study explores how CEO power affects organization capital investments and how it further affects the efficiency of firm resource allocation. We use the following three variables to measure CEO power: CEO founder, CEO-only insider and CEO duality. Our results indicate that the level of CEO power can influence a firm’s value by controlling the organization capital. When the firm’s CEO is also the founder, the CEO will attempt to increase investments in organization capital to create growth opportunities for the firm, which will therefore increase the firm's value. Specifically, when the company is in financial distress, the powerful CEO's increasing in organizational capital investment will expose the company to greater risk of loss of intangible assets. This result may further increase the company's price volatility.     

Investment decisions in manufacturing: assessing the effects of real oil prices and their uncertainty

We investigate the effects of real oil prices and their uncertainty on investment decisions. Making use of plant‐level data, we estimate dynamic, discrete‐choice models that allow modeling investment inaction, under different assumptions related to initial conditions and unobserved heterogeneity. We find that increases in real oil price changes and in real oil price uncertainty significantly reduce the likelihood of investment action, in line with the predictions of irreversible investment theory. We also document that investment decisions exhibit strong, pure state dependence and are also significantly affected by initial conditions. Copyright © 2012 John Wiley & Sons, Ltd.