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Influence of investor subjective judgments in investment decision-making

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  • Liu, Yu-hong
  • Jiang, I-ming

Abstract

By extending the results of previous literature, this study contributes to propose a fuzzy stochastic model for valuing the option to invest in an irreversible investment. The proposed model can provide reasonable ranges of option value, which investors can use to either exercise the option to invest or to delay investment. According to the right and left values of the triangular fuzzy number, investors can interpret the optimal difference based on their individual subjective judgments regarding volatility of future investment values. Finally, in this study two fuzzy goal examples are used to illustrate that the permissible fuzzy option values of pessimistic investors are relatively narrow to optimistic investors.

Suggested Citation

  • Liu, Yu-hong & Jiang, I-ming, 2012. "Influence of investor subjective judgments in investment decision-making," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 129-142.
    • Handle: RePEc:eee:reveco:v:24:y:2012:i:c:p:129-142
    DOI: 10.1016/j.iref.2012.01.002
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    Cited by:

    1. Yuhong Liu & I-Ming Jiang & Meng-I Tsai, 2019. "Influence of Managers’ Subjective Judgments on Project Abandonment Decision Making," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 419-443, March.

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    More about this item

    Keywords

    Option to invest; Fuzzy stochastic approach; Fuzzy goal;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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