Noisy Information and Investment Decisions: A Note
9 Pages Posted: 8 Aug 1998
Date Written: June 1997
This paper analyses investment decisions under uncertainty with noisy information. We provide closed-form solutions for the value of the investment policy and the optimal investment threshold. We show that when the information about the decision variable is noisy, the real option values generated by the model are close to that observed in reality. Noise is modelled with a mean-reverting stationnary process.
JEL Classification: G31
Suggested Citation: Suggested Citation
Gauthier, Laurent and Morellec, Erwan, Noisy Information and Investment Decisions: A Note (June 1997). Available at SSRN: https://ssrn.com/abstract=113189 or http://dx.doi.org/10.2139/ssrn.113189
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