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research article

Noisy information and investment decisions: A Note

Gauthier, Laurent
•
Morellec, Erwan  
1999
Finance

This paper analyses investment decisions under uncertainty with noisy information. We provide closed-form solutions for the value of the investment policy and the optimal investment threshold. We show that when the information about the decision variable is noisy, the real option values generated by the model are close to that observed in reality. Noise is modelled with a mean-reverting stationnary process.

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