Systematic Risk and the Firm's Experimental Strategy

Giora Harpaz and Stavros B. Thomadakis

Journal of Financial and Quantitative Analysis, 1982, vol. 17, issue 3, 363-389

Abstract: The valuation of the firm in the context of the Capital Asset Pricing Model (CAPM) of Sharpe [22] and Lintner [18] brings into a new focus the product ion-investment decisions of the firm faced with demand and cost uncertainty. The market value of the firm and the level of systematic risk which arise from its product ion-investment decisions become items of primary importance. Although there are earlier treatments of the real determinants of valuation and risk in a dynamic context (e.g., Thomadakis [24] and Myers and Turnbull [20]), the case of a firm which experiments for the acquisition of information can furnish new insights.

Date: 1982
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