Comparative statistics for
| Parameters | The riskiness of project cash flows | ||||||
|---|---|---|---|---|---|---|---|
| Volatility of regime B | Volatility of regime b | ||||||
| 2(0%) | 25(0%) | 30(0%) | 30(0%) | 35(0%) | 40(0%) | ||
| Base parameter | (2.79, 2.97) | (2.83, 3.15) | (2.88, 3.38) | (2.79, 2.97) | (3.14, 3.28) | (3.53, 3.62) | |
| μB = 0.04 | −0.01 | (2.69, 2.75) | (2.74, 2.91) | (2.79, 3.12) | (2.69, 2.75) | (3.03, 3.02) | (3.40, 3.32) |
| −0.005 | (2.74, 2.86) | (2.78, 3.03) | (2.84, 3.25) | (2.74, 2.86) | (3.08, 3.15) | (3.46, 3.47) | |
| +0.005 | (2.84, 3.08) | (2.89, 3.28) | (2.94, 3.51) | (2.84, 3.08) | (3.21, 3.41) | (3.61, 3.77) | |
| +0.01 | (2.90, 3.20) | (2.94, 3.40) | (2.99, 3.64) | (2.90, 3.20) | (3.28, 3.54) | (3.69, 3.93) | |
| μb = 0.01 | −0.003 | (2.68, 2.87) | (2.72, 3.05) | (2.76, 3.25) | (2.68, 2.87) | (3.01, 3.16) | (3.38, 3.49) |
| −0.0015 | (2.73, 2.92) | (2.78, 3.10) | (2.83, 3.32) | (2.73, 2.92) | (3.08, 3.22) | (3.46, 3.55) | |
| +0.0015 | (2.85, 3.03) | (2.89, 3.21) | (2.95, 3.44) | (2.85, 3.03) | (3.21, 3.34) | (3.61, 3.69) | |
| +0.003 | (2.91, 3.08) | (2.96, 3.27) | (3.01, 3.50) | (2.91, 3.08) | (3.28, 3.41) | (3.69, 3.76) | |
| δ = 0.06 | −0.005 | (2.97, 3.20) | (3.02, 3.40) | (3.08, 3.65) | (2.97, 3.20) | (3.37, 3.55) | (3.80, 3.93) |
| −0.025 | (2.87, 3.08) | (2.92, 3.27) | (2.98, 3.50) | (2.87, 3.08) | (3.25, 3.40) | (3.66, 3.77) | |
| +0.025 | (2.71, 2.88) | (2.75, 3.05) | (2.80, 3.27) | (2.71, 2.88) | (3.05, 3.17) | (3.42, 3.49) | |
| +0.005 | (2.64, 2.79) | (2.68, 2.96) | (2.73, 3.17) | (2.64, 2.79) | (2.96, 3.07) | (3.32, 3.37) | |
| c = 1 | −0.5 | (1.39, 1.49) | (1.42, 1.58) | (1.44, 1.69) | (1.39, 1.49) | (1.57, 1.64) | (1.76, 1.81) |
| −0.25 | (2.09, 2.23) | (2.12, 2.36) | (2.16, 2.53) | (2.09, 2.23) | (2.36, 2.46) | (2.65, 2.71) | |
| +0.25 | (3.48, 3.71) | (3.54, 3.94) | (3.61, 4.22) | (3.48, 3.71) | (3.93, 4.10) | (4.41, 4.52) | |
| +0.5 | (4.18, 4.46) | (4.25, 4.73) | (4.33, 5.07) | (4.18, 4.46) | (4.71, 4.92) | (5.29, 5.43) | |
| λB = 0.15 | −0.02 | (2.80, 3.01) | (2.85, 3.22) | (2.90, 3.47) | (2.80, 3.01) | (3.15, 3.31) | (3.54, 3.64) |
| −0.01 | (2.79, 2.99) | (2.84, 3.18) | (2.89, 3.42) | (2.79, 2.99) | (3.14, 3.29) | (3.53, 3.63) | |
| +0.01 | (2.78, 2.95) | (2.83, 3.13) | (2.88, 3.34) | (2.78, 2.95) | (3.14, 3.26) | (3.53, 3.61) | |
| +0.02 | (2.78, 2.94) | (2.82, 3.10) | (2.87, 3.31) | (2.78, 2.94) | (3.13, 3.25) | (3.53, 3.60) | |
| λb = 0.1 | −0.01 | (2.77, 2.95) | (2.82, 3.12) | (2.86, 3.33) | (2.77, 2.95) | (3.13, 3.26) | (3.52, 3.61) |
| −0.005 | (2.78, 2.96) | (2.82, 3.14) | (2.87, 3.36) | (2.78, 2.96) | (3.14, 3.27) | (3.53, 3.61) | |
| +0.005 | (2.79. 2.98) | (2.84. 3.17) | (2.90, 3.40) | (2.79, 2.98) | (3.15, 3.29) | (3.53, 3.62) | |
| +0.01 | (2.80. 2.99) | (2.85. 3.18) | (2.91, 3.42) | (2.80, 2.99) | (3.15, 3.29) | (3.54, 3.63) | |
| Parameters | The riskiness of project cash flows | ||||||
|---|---|---|---|---|---|---|---|
| Volatility of regime | Volatility of regime | ||||||
| 2(0%) | 25(0%) | 30(0%) | 30(0%) | 35(0%) | 40(0%) | ||
| Base parameter | (2.79, 2.97) | (2.83, 3.15) | (2.88, 3.38) | (2.79, 2.97) | (3.14, 3.28) | (3.53, 3.62) | |
| −0.01 | (2.69, 2.75) | (2.74, 2.91) | (2.79, 3.12) | (2.69, 2.75) | (3.03, 3.02) | (3.40, 3.32) | |
| −0.005 | (2.74, 2.86) | (2.78, 3.03) | (2.84, 3.25) | (2.74, 2.86) | (3.08, 3.15) | (3.46, 3.47) | |
| +0.005 | (2.84, 3.08) | (2.89, 3.28) | (2.94, 3.51) | (2.84, 3.08) | (3.21, 3.41) | (3.61, 3.77) | |
| +0.01 | (2.90, 3.20) | (2.94, 3.40) | (2.99, 3.64) | (2.90, 3.20) | (3.28, 3.54) | (3.69, 3.93) | |
| −0.003 | (2.68, 2.87) | (2.72, 3.05) | (2.76, 3.25) | (2.68, 2.87) | (3.01, 3.16) | (3.38, 3.49) | |
| −0.0015 | (2.73, 2.92) | (2.78, 3.10) | (2.83, 3.32) | (2.73, 2.92) | (3.08, 3.22) | (3.46, 3.55) | |
| +0.0015 | (2.85, 3.03) | (2.89, 3.21) | (2.95, 3.44) | (2.85, 3.03) | (3.21, 3.34) | (3.61, 3.69) | |
| +0.003 | (2.91, 3.08) | (2.96, 3.27) | (3.01, 3.50) | (2.91, 3.08) | (3.28, 3.41) | (3.69, 3.76) | |
| −0.005 | (2.97, 3.20) | (3.02, 3.40) | (3.08, 3.65) | (2.97, 3.20) | (3.37, 3.55) | (3.80, 3.93) | |
| −0.025 | (2.87, 3.08) | (2.92, 3.27) | (2.98, 3.50) | (2.87, 3.08) | (3.25, 3.40) | (3.66, 3.77) | |
| +0.025 | (2.71, 2.88) | (2.75, 3.05) | (2.80, 3.27) | (2.71, 2.88) | (3.05, 3.17) | (3.42, 3.49) | |
| +0.005 | (2.64, 2.79) | (2.68, 2.96) | (2.73, 3.17) | (2.64, 2.79) | (2.96, 3.07) | (3.32, 3.37) | |
| −0.5 | (1.39, 1.49) | (1.42, 1.58) | (1.44, 1.69) | (1.39, 1.49) | (1.57, 1.64) | (1.76, 1.81) | |
| −0.25 | (2.09, 2.23) | (2.12, 2.36) | (2.16, 2.53) | (2.09, 2.23) | (2.36, 2.46) | (2.65, 2.71) | |
| +0.25 | (3.48, 3.71) | (3.54, 3.94) | (3.61, 4.22) | (3.48, 3.71) | (3.93, 4.10) | (4.41, 4.52) | |
| +0.5 | (4.18, 4.46) | (4.25, 4.73) | (4.33, 5.07) | (4.18, 4.46) | (4.71, 4.92) | (5.29, 5.43) | |
| −0.02 | (2.80, 3.01) | (2.85, 3.22) | (2.90, 3.47) | (2.80, 3.01) | (3.15, 3.31) | (3.54, 3.64) | |
| −0.01 | (2.79, 2.99) | (2.84, 3.18) | (2.89, 3.42) | (2.79, 2.99) | (3.14, 3.29) | (3.53, 3.63) | |
| +0.01 | (2.78, 2.95) | (2.83, 3.13) | (2.88, 3.34) | (2.78, 2.95) | (3.14, 3.26) | (3.53, 3.61) | |
| +0.02 | (2.78, 2.94) | (2.82, 3.10) | (2.87, 3.31) | (2.78, 2.94) | (3.13, 3.25) | (3.53, 3.60) | |
| −0.01 | (2.77, 2.95) | (2.82, 3.12) | (2.86, 3.33) | (2.77, 2.95) | (3.13, 3.26) | (3.52, 3.61) | |
| −0.005 | (2.78, 2.96) | (2.82, 3.14) | (2.87, 3.36) | (2.78, 2.96) | (3.14, 3.27) | (3.53, 3.61) | |
| +0.005 | (2.79. 2.98) | (2.84. 3.17) | (2.90, 3.40) | (2.79, 2.98) | (3.15, 3.29) | (3.53, 3.62) | |
| +0.01 | (2.80. 2.99) | (2.85. 3.18) | (2.91, 3.42) | (2.80, 2.99) | (3.15, 3.29) | (3.54, 3.63) | |
Notes:
The baseline parameter values are fixed as follows: discount rate δ = 0.06, drift and volatility parameters of project cash flows in regime B are μB = 0.04 and σB = 0.2, drift and volatility parameters in regime b are μb = 0.01 and σb = 0.3, parameters governing the persistence of regime are λB = 0.15 and λb = 0.1, investment cost c = 1
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