Bulan, Laarni
[VerfasserIn]
;
Mayer, Christopher J.
[Sonstige Person, Familie und Körperschaft];
Somerville, C. Tsuriel
[Sonstige Person, Familie und Körperschaft]National Bureau of Economic Research
Irreversible Investment, Real Options, and Competition
: Evidence from Real Estate Development
Erschienen:
Cambridge, Mass: National Bureau of Economic Research, August 2006
Erschienen in:NBER working paper series ; no. w12486
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w12486
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Beschreibung:
We examine the extent to which uncertainty delays investment and the effect of competition on this relationship using a sample of 1,214 condominium developments in Vancouver, Canada built from 1979-1998. We find that increases in both idiosyncratic and systematic risk lead developers to delay new real estate investments. Empirically, a one-standard deviation increase in the return volatility reduces the probability of investment by 13 percent, equivalent to a 9 percent decline in real prices. Increases in the number of potential competitors located near a project negate the negative relationship between idiosyncratic risk and development. These results support models in which competition erodes option values and provide clear evidence for the real options framework over alternatives such as simple risk aversion