Keywords: real options, count data, Poisson process, Hausman test, investment decisions, tanker market, ship investment, econometrics, uncertainty, tankers
Real options econometrics for aggregate tanker investment decisions
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.