A principal can make an investment anticipating a repeated relationship with an agent, but the agent may appropriate the returns through ex post bargaining. I study how this holdup problem and efficiency depend on the contracting environment. When investment returns are observable, informal contracts ex post can be more efficient than formal contracts, as they induce higher investment ex ante: ...

Firms’systematic risk falls (increases) sharply following investment (disinvestment). This risk dynamics is driven by real investment and not by changes in …rm characteristics and is strongest among …rms with valuable investment opportunities, highly irreversible investment and low operating leverage. Consistent with rational pricing, …rms with poor investment opportunities, those most likely t...

Several papers at this conference have stressed the favorable effect on economic growth of increases in business investment, especially investment in machinery and equipment. The authors of these papers have reminded us that such investment does more than increase the capital stock. Investment also embodies new technologies and may involve externalities that cause the national return to private...

We examine how the evidence of the time-varying volatility in stock returns affects optimal dynamic portfolio choice of investors with long horizons. As return volatility shows a relatively small correlation with realized return, its time-variation is expected to cause little, if any, hedging demand (in the sense of Merton (1973)). However, we find that, once transaction costs are taken into ac...

The problem of how to maximize growth of wealth was solved over half a century ago by Kelly and Breiman: maximize the expected value of the logarithm of wealth after each period. However, as living organisms we have evolved to maximize gene replication, not wealth. Natural selection is a slow process, so our minds today are adapted to seeking our ultimate goal of reproduction in the environment...

The purpose of this paper is to empirically investigate the interaction between hedging, financing, and investment decisions. This work is relevant in that theoretical predictions are not necessarily identical to those in the case where only two decisions are being made. We argue that the way in which hedging affects the firms’ financing and investing decisions differs for firms with different ...

With the advent of post COVID-19 era, value investing strategy has popularized again in global stock markets as changing economic conditions, rising interest rates and different risk appetites. Therefore, it is reasonable to know how distinguish between stocks growth before investing. This paper aims examine application investment strategies based on indicators’ performance five companies selec...

ion of the functions/system (including software and hardware) constructed out of these building blocks. 1. IT investments: valuation and performance A trio of papers in this issue enhances our understanding of issues crucial to how firms should think about investing in new technology: how and how much information systems improve performance. An Application of the Learning Curve and the NonConst...