Real Options and Risk Dynamics
Autor: | Timothy C. Johnson, Dirk Hackbarth |
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Přispěvatelé: | University of Zurich |
Rok vydání: | 2015 |
Předmět: |
Economics and Econometrics
Equity risk Risk premium 2002 Economics and Econometrics fiscal resources military conflict military revolution Operating leverage Investment (macroeconomics) 330 Economics centralization 10007 Department of Economics State capacity Value (economics) Econometrics Economics Capital asset pricing model Profitability index war taxation Productivity |
Zdroj: | The Review of Economic Studies. 82:1449-1482 |
ISSN: | 1467-937X 0034-6527 |
DOI: | 10.1093/restud/rdv021 |
Popis: | We examine the asset pricing implications of a neoclassical model of repeated investment and disinvestment. Prior research has emphasized a negative relation between productivity and equity risk that results from operating leverage when capital adjustment is costly. In general, however, expansion and contraction options affect risk in the opposite direction: they lower equity risk as profitability declines. The general prediction is a non-monotonic overlay of opposing real option and operating leverage effects. For parameters chosen to match empirical firm characteristics, the predicted non-monotonicities are quantitatively important, and are detectable in the data. The calibrated model implies that real option effects dominate operating leverage effects, and the average firm is best described by an increasing risk profile, a conclusion supported by conditional beta estimates. The baseline calibration helps explain the profitability premium in the cross-section, but makes the value puzzle worse. Panels with heterogeneous firms can deliver simultaneous profitability and value effects that match empirical levels. |
Databáze: | OpenAIRE |
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