Title: Real options econometrics for aggregate tanker investment decisions

Authors: George Dikos

Addresses: Supply Chain Optimization and Planning, Lafarge Cement, P.O. Box 65582, 15402 Neo Psychiko, Athens, Greece

Abstract: Understanding the limitations of the Discounted Cash flow Methodology (DCF) has resulted in increased usage of the real option analysis for ship investment decisions under uncertainty. In this paper, our contribution is two-fold: We propose an equilibrium model for explaining aggregate investment behaviour in the new building industry for tankers and provide a framework for testing the real option markup hypothesis in our model for investment decisions in new tanker vessels. Under relevant aggregation assumptions, count data models are employed to test the robustness of the real options hypothesis and its impact on investment decisions.

Keywords: real options; count data; Poisson process; Hausman test; investment decisions; tanker market; ship investment; econometrics; uncertainty; tankers.

DOI: 10.1504/IJOSM.2008.017780

International Journal of Ocean Systems Management, 2008 Vol.1 No.1, pp.31 - 44

Published online: 12 Apr 2008 *