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News About News: Information Arrival and Irreversible Investment / Allan Drazen, Plutarchos Sakellaris.
- Format:
- Book
- Author/Creator:
- Drazen, Allan.
- Series:
- Technical Working Paper Series (National Bureau of Economic Research) no. t0244.
- NBER technical working paper series no. t0244
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- News About News
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1999.
- Summary:
- We analyze how uncertainty about when information about future returns to a project may be revealed affects investment. While 'good news' about future returns boosts investment, 'good news about news' (that is news that information may arrive sooner) is shown to depress investment. We show that early revelation increases the value of an irreversible investment project to a risk-neutral investor. We relate our results on preference for early revelation to results in non-expected utility theory. Our framework allows us to study irreversible investment projects whose value has a time-variable volatility. We also consider how heterogeneity of revelation information across firms may induce a better-informed firm to share its information with competitors.
- Notes:
- Print version record
- August 1999.
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