Optimal investment decisions when time-horizon is uncertain

Renewable generation sources still have not achieved economic validity in many countries including Korea, and require subsidies to support the transition to a low-carbon economy. An initial Feed-In Tariff (FIT) was adopted to support the deployment of renewable energy in Korea until 2011 and then was switched to the Renewable Portfolio Standard (RPS) to implement more market-oriented mechanisms. However, high volatilities in electricity prices and subsidies under the RPS scheme have weakened investment incentives. In this study we estimate how the multiple price volatilities under the RPS scheme affect the optimal investment decisions of energy storage projects, whose importance is increasing rapidly because they can mitigate the variability and uncertainty of solar and wind generation in the power system. We applied mathematical analysis based on real-option methods to estimate the optimal trigger price for investment in energy-storage projects with and without multiple price volatilities. We found that the optimal trigger price of subsidy called the Renewable Energy Certificate (REC) under multiple price volatilities is 10.5% higher than that under no price volatilities. If the volatility of the REC price gets doubled, the project requires a 26.6% higher optimal investment price to justify the investment against the increased risk. In the end, we propose an auction scheme that has the advantage of both RPS and FIT in order to minimize the financial burden of the subsidy program by eliminating subsidy volatility and find the minimum willingness-to-accept price for investors.

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Investment Decisions and Time Horizon: Risk Perception and Risk Behavior in Repeated Gambles

Management Science ◽

10.1287/mnsc.1050.0429 ◽

2005 ◽

Vol 51 (12) ◽

pp. 1777-1790 ◽

Cited By ~ 71

Author(s):

Alexander Klos ◽

Elke U. Weber ◽

Martin Weber

Keyword(s):

Risk Perception ◽

Risk Behavior ◽

Time Horizon ◽

Investment Decisions

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Optimal Investment Decisions for a Zero Emission Building under Uncertainty: Stochastic BUTLER

10.1109/sest50973.2021.9543287 ◽

2021 ◽

Author(s):

Ingrid Marie Andersen ◽

Karen Byskov Lindberg

Keyword(s):

Investment Decisions ◽

Optimal Investment ◽

Zero Emission

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Evaluating the Effectiveness of the Momentum Strategy for Responsible Investment in the Russian Stock Market

SHS Web of Conferences ◽

10.1051/shsconf/20219302020 ◽

2021 ◽

Vol 93 ◽

pp. 02020

Author(s):

Danila Ovechkin ◽

Liudmila Reshetnikova ◽

Natalia Boldyreva

Keyword(s):

Time Horizon ◽

Investment Decisions ◽

Sharpe Ratio ◽

Momentum Strategy ◽

Responsible Investment ◽

Market Index ◽

Monthly Return ◽

Key Factor ◽

Russian Stock Market ◽

Asset Managers

In modern conditions, the integration of ESG-criteria into investment decisions of asset managers is considered as a key factor in sustainable economic development. We examine the effectiveness of the Momentum-ESG strategy based on the Responsibility and Openness Index in comparison with the Momentum strategy, which is based on the Moscow Exchange Broad Market Index, since December 2011 to December 2020. We propose an algorithm for integrating ESG criteria into momentum strategy. We select "winners" and "losers" stocks based on their monthly return. The Momentum-ESG strategy has a high Sharpe ratio for a time horizon of 12 months, the Momentum strategy - for a time horizon of 6 months. The testing of the Momentum-ESG strategy shows its greater efficiency in terms of the Sharpe ratio compared to the Momentum strategy, which does not take into account the ESG-factors, in the investing period.

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AMERIREAL Corporation

Pitfalls and Triumphs of Information Technology Management ◽

10.4018/978-1-87828-961-2.ch002 ◽

2011 ◽

pp. 21-31

Author(s):

Mo Adam Mahmood ◽

Gary J. Mann ◽

Mark Dubrow

Keyword(s):

Information Technology ◽

Organizational Performance ◽

Investment Decisions ◽

Optimal Investment ◽

Student Thinking ◽

It Investment ◽

The Subject ◽

Case Based

This instructional case, based on an actual firm’s experience (name changed) is intended to challenge student thinking with regard to the extent to which information technology (IT) can demonstrably contribute to organizational performance and productivity, and to which users of IT can relate their investment decisions to measurable outcomes. Relationships between an organization’s investment in IT and the effect of such investments on the organization’s performance and productivity have long been the subject of discussion and research. Managers, interested in knowing the “payoff” of such investments, are continually seeking answers to this question. A failure to understand the benefits of IT investment, or an over- or under-estimation of the benefits of a planned investment in IT relative to the costs, will likely result in less than optimal investment decisions.

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