Ponencia
On the use of the Cauchy distribution to describe price fluctuations in R&D and other forms of real assets
Autor/es | Casault, Sébastein
Groen, Aard J. Linton, Jonathan D. |
Coordinador/Director | Liñán, Francisco
Guzmán Cuevas, Joaquín J. |
Fecha de publicación | 2011 |
Fecha de depósito | 2017-04-27 |
Publicado en |
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ISBN/ISSN | 978-84-694-7290-3 |
Resumen | An 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 ... An 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). |
Cita | Casault, 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. |
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