Optimal investment sequence

Summary. This paper investigates the optimal order in which a collection of projects should be taken on if only one project can be done at a time. We associate a number called priority value with each project and show that one should order the projects in decreasing priority values. We also show that this priority value rule is equivalent to the replication rule in the literature. Finally, we compare the rankings given by the priority value rule and the ordinary present value rule.     

Parental preference for investment risk incites family strife

Older stronger siblings in many birds and mammals enjoy decisive and often lethal advantages in sibling competitions by virtue of being born or hatching first. Asynchronous hatching in birds divides the brood into core (advantaged) and marginal (disadvantaged) elements generating an asymmetric sibling rivalry with often fatal outcomes. Given that these asymmetries are under parental control, the obvious question is why parents seem to incite family conflict. Here I show in a model system (an altricial songbird) that family strife in the form of fatal sibling rivalry arises as a consequence of parental investor??s appetite for risk: in accord with an axiom of investment theory, obtaining greater potential rewards required taking greater risks. I analyze the risk and reward of investment in different family structures using a tool borrowed from modern portfolio theory, and show that the most successful parents gambled with brood size, placing bets on incipient families that often proved too large. Failed bets triggered a fatal sibling rivalry for insufficient resources. Parents driven to maximize reproductive success incited family strife among their offspring.     

Optimal tax policy and foreign direct investment under ambiguity

We analyze the optimal timing of an irreversible foreign direct investment by a foreign firm and the optimal tax policy by a host country under ambiguity. We derive the optimal GDP level at which the foreign firm switches from exporting to a foreign direct investment. Furthermore, we derive the optimal tax policy by the host country, and analyze the effect of an increase in ambiguity on the optimal tax policy. We show that the host country should reduce the optimal corporate tax rate from the host government’s perspective in response to an increase in ambiguity. Our result is different from the one obtained by Pennings (2005) that shows that an increase in risk induces an increase in the optimal corporate tax rate.     

Optimal investment and consumption with return predictability and execution costs

We provide a closed-form solution to an optimal investment and consumption problem for a constant absolute risk aversion (CARA) agent, who faces execution costs when trading correlated risky assets with return predictability. The optimal investment strategy indicates that the agent should trade gradually toward a dynamic aim portfolio, which is an adjusted Merton portfolio with modifications to account for the persistence of the return-predicting signals and the execution costs. The optimal consumption strategy is quadratic in the return-predicting signals and linear in the agent's wealth. Our numerical studies show that the execution costs diminish the importance of asset return predictability on the agent's optimal investment strategy, thereby confirming the conjecture raised by Liu (2004). In addition, the presence of the intermediate consumption leads to a more aggressive aim portfolio than the case without consumption.     

Market structure and R&D investment spillovers

This paper examines research and development (R&D) investment spillovers across different market structures. In particular, we extend the recent work in Matsumura et al. (2013) to incorporate R&D investment spillovers. When the market is a duopoly, noncooperative (cooperative) R&D investment is preferred for small (large) spillovers of less (more) than half. We show that as a market structure becomes more competitive, noncooperative R&D investment is more likely to be preferred. Moreover, noncooperative R&D is not always decreasing with the intensity of competition, even though it is ultimately zero with perfect competition. Our theoretical results fit well with existing empirical findings.     

Optimal size, optimal timing and optimal financing of an investment

Corporate investment is an important determinant of economic well-being. The existing literature identifies optimal investment size and timing without the possibility of debt financing, as well as the effect of debt financing on investment timing without the option to choose investment size. This paper contributes to the literature by identifying the optimal size, optimal timing and optimal financing for an investment when the firm controls all three decisions (as it usually does in practice). The investment size and investment trigger are generally positively related: when investment is delayed (accelerated) it is larger (smaller) in size, thus the overall effect on investment is ambiguous. However, when tax rate or bankruptcy cost is increased, the trigger rises and size falls, hence the effect on investment is unambiguously negative. The effect of debt financing on investment depends on the amount of debt used; with the optimal amount of debt, investment is delayed relative to the no-debt case, and this delay can be economically significant; however, the investment, when eventually made, will be larger in size. Overall, it is not appropriate to ignore either the firm’s ability to choose investment size or its option to use debt financing, when modeling the investment decision.     

Optimal pricing and investment for resources with alternative uses and capacity limits

Airport runways, radio spectrum, and hospital beds are resources with capacity limits used to provide multiple services with specific capacity requirements in separate markets, which contribute to recover capacity investment costs. A welfare-maximizing and (possibly) budget-constrained firm, whose operating costs significantly increase as total capacity use presses against capacity, chooses prices and capacity. When the equilibrium capacity is reached, second-best Ramsey prices must be adjusted, and mark-ups on marginal costs may be higher for services with higher demand elasticities, if they intensively use capacity. Moreover, for a given output vector, the firm invests more than in first best. Instead, the equilibrium capacity may be first best when there is excess capacity to reduce operating costs and thus improve welfare. Our model can be used as a benchmark to evaluate the efficiency of market mechanisms for resource allocation and pricing, or when market mechanisms are not adopted.

     

Optimal investment and consumption strategies with state-dependent utility functions and uncertain time-horizon

This paper considers the multi-period optimal strategies for an investment-only problem and an investment–consumption problem. The financial market is regime-switching and consists of one risk-free asset and multiple risky assets. The state process of the financial market is modeled by a finite-state Markov chain. Asset returns and utility functions are affected by the states of the financial market. The investment time-horizon is uncertain and exogenous. By adopting the dynamic programming approach, explicit expressions for optimal value functions and optimal investment and consumption strategies are derived. Moreover, some discussions and numerical examples are provided to illustrate our results, which extend some results in the existing literature to more general situations and show some interesting phenomena.     

社保基金股票投资组合的行业偏好初探

全国社会保障基金是价值型投资者,行业配置对其具有重要意义。通过考察2008年末全国社会保障基金的股票委托投资组合在行业配置上总体的分布情况,分析出该基金的受托人在股票市场处于周期性底部区域时偏好投资于周期型行业,尤其是传播与文化产业,交通运输与仓储业,电力、煤气及水的生产和供应业,以及房地产业,并得出了在这一时段受托人的行业配置风格与该基金的投资原则和该基金作为价值型机构投资者的定位相符的结论。     

中澳自由贸易区建设可行性浅析

从中澳之间货物贸易、服务贸易的角度对中澳自由贸易区建设的可行性进行简要分析。首先对中澳贸易强度指数及显性比较优势指数的测算,证实了中澳双方的贸易发展主要建立在产业间贸易的基础上的,产业间具有很强互补性。其次,分析了目前中澳双边服务贸易的特点及发展趋势。最后,为进一步推进中澳自贸区建设提出相关建议。     

流通产业的组织结构及其投资运行

经济理论界关于流通产业组织结构的研究,一般是根据产业组织学理论从商品流通的市场关系对其进行契约分析,从流通产业内部的资源配置结构及关联对其展开"结构、行为、绩效"的框架分析,而没有对流通产业的投资制度安排予以高度的关注.本文认为,流通产业的重要特点之一,是其组织结构与治理结构具有一定的相关性.围绕这一特点,本文在对流通产业组织结构作出概要分析的基础上,对市场治理结构作用于组织结构及其对投资决策的机理进行了分析,并结合我国的实际对流通产业的组织结构与投资决策的市场关联作出了相关理解.     

Optimal taxation and discount rate for public investment in a growth setting

This paper studies the optimal policy of a government which maximizes intertemporal social welfare using such instruments as taxes on interest income and wages, and debt in conjunction with public investment. In doing so, it has to face a decentralized economy where in each generation individuals and firms are free to maximize their own objectives subject to their own private constraints. The welfare function is a sum of discounted generational utilities and its maximization is handled by using dynamic programming. From the first order conditions so derived, it appears that an optimal policy of taxation and public capital accumulation is that which sets the tax rates according to Ramsey's optimal taxation structure and which equates the rate of return on public investment to the rate of social time preference.     

基于投资效率的湖北固定资产投资结构分析

投资是湖北省经济增长最重要的推动力量,但湖北省投资增长处于非均衡发展的状态。为了避免湖北省投资因过热而浪费社会资源或者因投资不足造成经济增长的停滞,应按照投资效率原则对固定资产投资结构进行调整。通过阐述湖北省固定资产投资产业和行业结构基本情况,利用投资效率指标对湖北省固定资产投资结构的效率进行了分析,并对投资政策进行了评。在此基础上,提出湖北省今后一段时期固定资产投资的合理的产业和行业结构,为湖北省固定资产投向提供政策参考。     

Optimal endowments of transport investment: an empirical analysis for mauritius

We investigated the issue of optimality of the provision of transport capital in economic progress. Using an optimization growth model, a condition allowing the assessment of whether public capital would be under- or overprovided was theoretically derived. By deriving a growth equation from a simple production function, we empirically tested this condition for the case of Mauritius during the period 1950–2005. Transport capital is observed to have played an important role in explaining growth of the country. Same is reported for nontransport capital. Interestingly, the null hypothesis that the coefficients of all the types of capital are equal could be rejected, and the estimated coefficient on transport investment proved to be higher than that on private investment (and the nontransport capital). This suggests that transport capital would still be underprovided for the Mauritian case, despite government investment.     

Technological-knowledge bias and the industrial structure under costly investment and complementarities

We develop an extended directed technological change model with vertical and horizontal R&D to analyze the economic growth rate, the technological-knowledge bias and the industrial structure, assuming: (i) complementarities between intermediate goods, and (ii) internal costly investment. We find that complementarities directly affect long-run technological-knowledge bias and relative production, both elements influence the economic growth rate and neither affects the skill premium and the relative number of firms. We also verify that the relationship between the relative supply of skills and both economic growth and the industrial structure suggested by our model is qualitatively consistent with recent empirical data for a number of developed countries.     

Optimal investment strategies in an international economy with stochastic interest rates

We investigate how investors should optimally choose to invest in a dynamically complete international market. We find closed-form solutions for the optimal investment strategy and for the wealth loss an investor suffers from not investing internationally. Theoretically, we show that the gain from international investment is due to the speculative investment only, and why it is important for an investor from a large economy to invest in a small economy. In a numerical example we compare the wealth losses investors from Denmark and the U.S. suffer due to home bias.     

中国卫生投资与经济增长适应程度分析

目的：分析中国卫生投资与经济增长适应程度。方法：通过建立＂推动效应＂模型和＂拉动效应＂模型对中国卫生经费支出的水平与国民经济增长的适应程度进行具体测算。结果：中国卫生投资增长速度稍快于国民经济增长速度,其中,政府卫生投资增速稍滞后于国民经济增速,社会卫生投资增速稍快于国民经济增速,个人卫生投资增速大大超过国民经济增速。结论：减弱个人卫生投资,适当减缓社会卫生的投资,适当增加政府对卫生投资,三方面同时进行调整,达到保持或稍减缓总卫生投资增速,使其与国民经济发展相符。     

Core competencies,matching and the structure of foreign direct investment

We develop a matching model of foreign direct investment to study how multinational firms choose between greenfield investment, acquisitions and joint ownership. Firms must invest in a continuum of tasks to bring a product to market. Each firm possesses a core competency in the task space, but the firms are otherwise identical. For acquisitions and joint ownership, a multinational enterprise (MNE) must match with a local partner that may provide complementary expertise within the task space. However, under joint ownership, investment in tasks is shared by multiple owners and, hence, is subject to a holdup problem that varies with contract intensity. In equilibrium, ex ante identical multinationals enter the local matching market, and, ex post, three different types of heterogeneous firms arise. Specifically, the worst matches are forgone and the MNEs invest greenfield; the middle matches operate under joint ownership; and the best matches integrate via full acquisition. We link the firm‐level model to cross‐country and industry predictions and find that a greater share of full acquisitions occur between more proximate markets, in hosts with greater revenue potential and within contract‐intensive industries. Using data on partial and full acquisitions across industries and countries, we find robust support for these predictions.     

Financial structure,productivity, and risk of foreign direct investment

This study investigates how heterogeneous firms choose their lenders when they raise external finance for Foreign Direct Investment (FDI) and how the choice of financing structure affects FDI activities. We establish an asymmetric information model to analyze why certain firms use private bank loans while others use public bonds to finance foreign production. The hidden information is the productivity shock to FDI. Banks are willing to monitor the risk of FDI, while bondholders are not; hence, banks act as a costly middleman that enables firms to avoid excessive risk. We show that firms’ productivity levels, the riskiness of FDI, and the relative costs of bank finance and bond finance are three key determinants of the firm’s financing choice. Countries with higher productivity, higher bank costs, or investment in less risky destinations, use more bond finance than bank finance. These results are supported by evidence from OECD countries.