Empirical Evaluation of Objective Investment Decision Rules

1976 ◽  
Vol 18 (4) ◽  
pp. 52-59
Author(s):  
Serge Matulich
Keyword(s):  
Investment Decision ◽  
Decision Rules ◽  
Empirical Evaluation

scholarly journals Portfolio Model Based on Scenario Tree

2021 ◽  
Vol 251 ◽  
pp. 01114
Author(s):  
Haiyan Xuan ◽  
Cunliu Yao ◽  
Hongjian Li ◽  
Xiaoke Chang
Keyword(s):  
Monte Carlo ◽  
Stock Returns ◽  
Stock Return ◽  
Investment Decision ◽  
Decision Rules ◽  
Return Rate ◽  
Scenario Tree ◽  
The Monte Carlo Method ◽  
The Difference ◽  
Mean Variance

The uncertainty of return rate will affect the investment decision. In this paper, the ARMA-GARCH model is used to describe the data characteristics of stock returns, and the Monte Carlo method is used to construct a scenario tree containing the stock return rate and node probability. The decision rules are used to determine the nodes on the scene tree, and two mean-variance models are established based on the scene tree. Finally, four stock data are selected to optimize the portfolio of the constructed model, the results show that the scenario tree has good advantages in describing the uncertainty problem, and the constructed model is effective and feasible; the difference between the two models is analyzed and compared, which provides a reference for different investors.

scholarly journals Guidelines for the investment choice of capital projects by public corporations

2010 ◽  
Vol 7 (3) ◽  
pp. 407-415
Author(s):  
Wessel Pienaar
Keyword(s):  
Decision Making ◽  
Investment Decision ◽  
Decision Rules ◽  
Capital Projects ◽  
Public Corporations ◽  
Project Appraisal ◽  
Investment Choice ◽  
Long Run ◽  
Selection Of

This article provides guidelines on how public corporations can choose capital projects on the basis of economic and financial criteria. Project appraisal, selection and prioritisation criteria are listed, followed by a description of the way in which the result of each appraisal technique should be interpreted. Criteria that should be adhered to in the selection of mutually exclusive projects and the prioritisation of functionally independent projects in order to maximise the net output of public corporations in the long run are supplied. Applications of the proposed investment decision rules are illustrated by examples. Two techniques are proposed that may be used as additional decision-making instruments when evaluated projects show similar degrees of long-term financial viability.

scholarly journals The application of systems analysis to enhance the performance of logistic systems in supporting economic growth and development

2014 ◽  
Vol 11 (3) ◽  
pp. 485-495
Author(s):  
Wessel Pienaar
Keyword(s):  
Systems Analysis ◽  
Investment Decision ◽  
Decision Rules ◽  
Decision Makers ◽  
Capital Projects ◽  
Economic Growth And Development ◽  
Project Appraisal ◽  
Long Run ◽  
Selection Of

This paper provides guidelines on how decision-makers can choose capital projects on the basis of economic and financial criteria by applying a systems-analysis approach. Project appraisal, selection and prioritisation criteria are listed, followed by a description of the way in which the result of each appraisal technique should be interpreted. Criteria that should be adhered to in the selection of mutually exclusive projects and the prioritisation of functionally independent projects in order to maximise net output in the long run are supplied. Applications of the proposed investment decision rules are illustrated by examples. Two techniques are proposed that may be used as additional decision-making instruments when evaluated projects show similar degrees of long-term financial viability. Five performance areas that collectively best represent successful organisational logistics performance are detailed.

scholarly journals INVESTMENT, IRREVERSIBILITY, AND UNCERTAINTY IN ENERGY BEET–BASED ETHANOL

2016 ◽  
Vol 48 (4) ◽  
pp. 403-429 ◽  
Author(s):  
KASSU WAMISHO HOSSISO ◽  
DAVID RIPPLINGER
Keyword(s):  
Real Options ◽  
Investment Decision ◽  
Market Price ◽  
Decision Rules ◽  
Optimal Investment ◽  
Irreversible Investment ◽  
Energy Beet ◽  
Gross Margins ◽  
Entry Decisions

Abstract:This study evaluates optimal investment decision rules for an energy beet ethanol firm to exercise the option to invest, mothball, reactivate, and exit the ethanol market, considering uncertainty and volatility in the market price of ethanol, feedstock, and irreversible investment. A real options framework is used to compute gross margins of ethanol that trigger entry into and exit from the ethanol market. Results show that volatility in ethanol gross margins has much greater effects on exit and entry decisions than investment costs, and it also causes firms to wait longer before entering the ethanol market and, once active, to wait longer before exiting.

scholarly journals A Simple GDP-based Model for Public Investments at Risk

2017 ◽  
Vol 8 (1) ◽  
pp. 91-114
Author(s):  
Bernard Lapeyre ◽  
Emile Quinet
Keyword(s):  
Cost Benefit Analysis ◽  
Investment Decision ◽  
Decision Rules ◽  
Stopping Time ◽  
Cost Benefit ◽  
Cost Ratio ◽  
Public Authorities ◽  
Public Investments ◽  
Time Problem ◽  
Wide Range

Investment decision rules in risk situations have been extensively analyzed for firms. Most research focus on financial options and the wide range of methods based on dynamic programming currently used by firms to decide on whether and when to implement an irreversible investment under uncertainty. The situation is quite different for public investments, which are decided and largely funded by public authorities. These investments are assessed by public authorities, not through market criteria, but through public Cost-Benefit Analysis (CBA) procedures. Strangely enough, these procedures pay little attention to risk and uncertainty. The present text aims at filling this gap. We address the classic problem of whether and when an investment should be implemented. This stopping time problem is established in a framework where the discount rate is typically linked toGDP, which follows a Brownian motion, and where the benefits and cost of implementation follow linked Brownian motions. We find that the decision rule depends on a threshold value of the First Year Advantage/Cost ratio. This threshold can be expressed in a closed form including the means, standard deviations and correlations of the stochastic variables. Simulations with sensible current values of these parameters show that the systemic risk, coming from the correlation between the benefits of the investment and economic growth, is not that high, and that more attention should be paid to risks relating to the construction cost of the investment; furthermore, simple rules of thumb are designed for estimating the above-mentioned threshold. Some extensions are explored. Others are suggested for further research.

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