R&D Valuation and Success Intensity. Notes: The figure plots V (λ, c) as a function of λ. The parameters are set as following: K = 5, n = 2, c = 10, σ = 0.2, μ = 0.1, r f = 0.03, ζ = 0.08, φ = 0.05, a = 10, and b = 0.6.

Contexts in source publication

Context 1

... Berk, Green, and Naik (2004, Table 2), we know that V (λ, c) increases with c; and from Gu (2016, Figure 1) and Li (2011, Figure 4), we also know that rp(λ, c) increases with the R&D expenditure. This positive R&D premium in Berk, Green, and Naik (2004)'s model is also verified in Figure A1 of the Online Appendix. ...

Context 2

... Berk, Green, and Naik (2004, Table 2), we know that V (λ, c) increases with c; and from Gu (2016, Figure 1) and Li (2011, Figure 4), we also know that rp(λ, c) increases with the R&D expenditure. This positive R&D premium in Berk, Green, and Naik (2004)'s model is also verified in Figure A1 of the Online Appendix. It is interesting to examine the relation between V (λ, c) and λ. ...

Context 3

... on a set of parameters similar to Berk, Green, and Naik (2004 , Table 1), we find that V (λ, c) increases with λ and is a concave function of λ. These observations are shown in Figure 1. The concavity implies that increasing dispersion in λ decreases the expected value of V (λ, c), which has important implications when we introduce uncertainty about λ into the model. ...

Context 4

... the source of uncertainty is assumed to be idiosyncratic and, therefore, the probability density function remains identical under both physical and risk-neutral measures. Given the concavity in Figure 1, it is straightforward to see by Jensen's inequality that, all else being equal, ...

Context 5

... results are shown in Figure A1 of the Online Appendix (see there for a discussion of the results). ...