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- W2763728129 abstract "We consider the entrepreneur’s problem of having a real investment opportunity with undiversifiable risk in a finite horizon. By explicitly characterizing the consumption and investment problem, we show that the remaining time to undertake the project has a significant impact on the characteristics of a firm’s cash flow or return dynamics. Our theory predicts that a firm with an ample time horizon to invest tends to have a cash flow or the stock return with a higher idiosyncratic volatility. Furthermore, we also extend the baseline model to the cases in which the entrepreneur has several projects that can only be sequentially exercised. In this case, a project with a lower idiosyncratic volatility will be exercised first when the investment horizon is long." @default.
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- W2763728129 date "2019-03-09" @default.
- W2763728129 modified "2023-09-24" @default.
- W2763728129 title "Decision Horizon and Idiosyncratic Risk" @default.
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