Abstract
AbstractThis paper focuses on a particular aspect of the R&D decision process, i.e. the screening of alternative projects at the firm level. A review of the traditional methods of risk analysis, based on two‐parameter measures of risk and return, strongly suggests that they are unable to capture the essential skewed nature of R&D decisions due to the underlying assumption of normal distributions. Fortunately, the availability of alternative models based on ‘distribution free’ methods has significantly increased our ability to evaluate highly skewed returns. This paper sets out, in some detail, the case of using one such model, the stochastic dominance paradigm, to screen R&D proposals.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.