Liñán, FranciscoGuzmán Cuevas, Joaquín J.2017-04-272017-04-272011Casault, S., Groen, A.J. y Linton, J.D. (2011). On the use of the Cauchy distribution to describe price fluctuations in R&D and other forms of real assets. En 8th ESU Conference on Entrepreneurship (1-9), Sevilla: Universidad de Sevilla.978-84-694-7290-3http://hdl.handle.net/11441/58827An improved model for describing the returns of assets that result from R&D efforts is needed. Such a model may lead to better decision support tools to monetize the value of R&D activities for both public and private sector technology managers. Real option pricing methodologies are often used to gauge appropriate funding levels for assets such as R&D projects that contain large time-dependent uncertainties. A study of the commonly used Black-Scholes equation finds that the Gaussian distribution assumption used to describe the behaviour of the underlying assets’ fluctuations is not appropriate for R&D. This conclusion is based on a study of 43 military R&D projects and 100 micro-cap technology intensive small firms. A power law, such as the Cauchy distribution, is shown to be more accurate in describing fluctuations in returns on R&D investments. Using historical data we find that the Cauchy distribution is a better representation of the underlying assets’ behaviour in military R&D projects and in technology intensive firms with small market capitalization (i.e., single project firms that are commercializing R&D).application/pdfengAttribution-NonCommercial-NoDerivatives 4.0 Internacionalhttp://creativecommons.org/licenses/by-nc-nd/4.0/info:eu-repo/semantics/conferenceObjectinfo:eu-repo/semantics/openAccess