In this paper, we will propose numerically tractable formulations of the diversification-consistent DEA tests, which generalize traditional DEA tests as well as mean-risk models. We employ general deviation measures to measure risk of the investment opportunities. We will compare strength of the tests and give characterizations of efficient and inefficient investment opportunities. US industry ...

We develop a numerical scheme for determining the optimal asset allocation strategy for time-consistent, continuous time, mean variance optimization. Any type of constraint can be applied to the investment policy. The optimal policies for time-consistent and pre-commitment strategies are compared. When realistic constraints are applied, the efficient frontiers for the precommitment and time-con...

This paper shows that coordination failure and contractual incompleteness can lead to socially excessive investment. Firms and workers choose investment levels, then enter a stochastic matching process. If investment levels are discrete, and match frictions are low, high-investing workers (firms) impose a negative pecuniary externality on any worker (firm) who cuts investment. Specifically, an ...

This paper uses a new data-set to examine how internal capital markets and foreign ownership affect investment. Our data allow us to compare investment behaviour of listed subsidiaries with stand-alone firms while controlling for investment opportunities of parent and subsidiary firms. We evaluate how the size of ownership and the geographical proximity of majority owners to their subsidiaries ...

Regulators across many different jurisdictions and industries have recently adopted the practice of setting access prices based on the current costs of providing the relevant facilities. Though widely regarded as being efficient, the efficiency implications of using current costs instead of historical costs have not been formally analyzed. Our analysis shows that given stochastic costs, forward...

A long history of debate exists among macroeconomists regarding the degree to which public capital contributes to overall economic activity. Estimates of the output elasticity with respect to public capital range anywhere from 0.06 in early work by Ratner (1983) to as high as 0.39 in a widely cited study by Aschauer (1989). This elasticity refers to the percentage change in GDP induced by a giv...

Firms with private information about the outcomes of production under uncertainty may face capital (liquidity) constraints that prevent them from attaining efficient levels of investment in a world with costly and/or imperfect monitoring. As an alternative, we examine the efficiency of a simple pooling scheme designed to provide a public (cooperative) supply of liquidity that results in the fir...

This paper studies bilateral trade in which the seller makes a hidden investment that influences the buyer’s hidden valuation. In general it is impossible to implement both first-best efficient trade and efficient investment using budgetbalanced trading mechanisms. The paper fully characterizes the constrained efficient contracts. It is shown that the optimal tradeoff between allocative efficie...

In this paper we show by means of an actual project how a computer based system can support whole process of management of the intangible investments – intelligence, design, choice, implementation, and control in an efficient manner. For the planning of intangible investment projects we have developed a set of tools where several decision aids are integrated to support the different phases of t...