Irreversible Investment and Changes in Regime

  • John Dri¢ll, Martin Sola
  • Published 2001

Abstract

Recent empirical analysis has shown the importance of stochastic regime switching in a number of contexts. For example the ‡ow of real dividends in the US appears to be characterised by a random walk with drift which switches randomly between two states, a high-variance low-growth state, and a high-growth low-variance state. However the analysis of the… (More)

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