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R. C. Merton, “A Simple Model of Capital Market Equi-librium with Incomplete Information,” The Journal of Finance, Vol. 42, No. 3, 1987, pp. 483-510.

has been cited by the following article:

  • TITLE: An Exploration of the R & D Value beyond the Generally Accepted Accouting Principles

    AUTHORS: Yu-Wen Lan

    KEYWORDS: Real R & D Option, Poisson Event, Exponential Decay, GAAP

    JOURNAL NAME: Technology and Investment, Vol.1 No.2, May 25, 2010

    ABSTRACT: This paper utilized the real R & D option theory especial the Bellalah [1] information cost model as the discussion base for the exploration of R & D value. We extended Bellalah’s model as to add the factors of Poisson event and exponential decay to approximate the reality; we calculated the derivative value of R & D investment and relaxed the Generally Accepted Accounting Principles (GAAP) as to deem the accumulated R & D investment the capital owned by a firm and to evaluate it as well. The empirical results enlightened us: our modified model meet with reality better than the original model; the derivative R & D value have explanatory power to the equity behavior especial the risk magnitude proxied by β and lastly, to entirely expense the R & D investment could be problematic since R & D investment own the property of capital.