Uncertainty Resolution under Truncation: Applications on the Investment Decision.

• Main Authors: Lin Yueh-Hsiang, 林岳祥
• Other Authors: Yeh Hsiaw-Chan
• Format: Others
• Language: zh-TW
• Published: 1999
• Online Access: http://ndltd.ncl.edu.tw/handle/97099079652468355318

碩士 === 國立臺灣大學 === 財務金融學研究所 === 87 === Uncertainty Resolution Theory is an extensive of the Optimal Stopping Theory, introduced by Snell(1952). The applications in the financial and economic field are about investment or innovation decisions, firstly appeared in Jensen (1982), and generalized in McCardle(1985). This paper follows McCardle's model, and considers the assumption that the decision period is truncated in fixed numbers. We show that no matter what the curvature of profit function is, the value of collection information is higher when the prior anticipated return is more close to zero. Therefore, the sufficient and necessary condition about the existence of the continuation region is that the value of collection information on the break-even point is strictly positive. Cash inflow and the curvature of profit function only affect the position of break-even point but not the condition. Besides, under the characteristic of uncertainty resolution model, the existence condition is irrelevant in the number of periods, and the firm's optimal strategy is still conic-shaped.