An Empirical Test of Heuristics and Biases Affecting Real Option Valuation  

Oleh:

Miller, Kent D. ; Shapira, Zur

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: Strategic Management Journal vol. 25 no. 3 (Mar. 2004), page 269-284.
Topik: valuation; real options; behavioural decision theory; risk preferences; discount rates; prospect theory

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: SS30.14 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

This study applies insights from behavioural decision theory to explain how managers value call and put options. Behavioural decision theory points to important deviations from the assumptions of normative option pricing models in finance. We used a questionnaire too collect option pricing data to test our behavioural hypotheses. The evidence indicates specific biases affecting subjective valuations of options : 1. buyers and sellers price options below their expected balues 2. buyers' prices are consistently below sellers' prices 3. irrelevant outcomes decrease option values 4. discount rates vary with the option time horizon, and 5. changes in option values fo not fully reflect increases in exercise prices. We discuss the implications of these findings for the management for real options and suggest directions for developing real option theory.

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