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The Effect Of Uncertainity On Investment
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Book Synopsis Investment under Uncertainty by : Robert K. Dixit
Download or read book Investment under Uncertainty written by Robert K. Dixit and published by Princeton University Press. This book was released on 2012-07-14 with total page 484 pages. Available in PDF, EPUB and Kindle. Book excerpt: How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending. This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.
Book Synopsis The Effect of Uncertainity on Investment by : John Vincent Leahy
Download or read book The Effect of Uncertainity on Investment written by John Vincent Leahy and published by . This book was released on 1995 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effects of Uncertainty on Investment and the Expected Long-run Capital Stock by : Andrew B. Abel
Download or read book The Effects of Uncertainty on Investment and the Expected Long-run Capital Stock written by Andrew B. Abel and published by . This book was released on 1983 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Uncertainty and Investment Dynamics by : Nick Bloom
Download or read book Uncertainty and Investment Dynamics written by Nick Bloom and published by . This book was released on 2006 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that, with (partial) irreversibility, higher uncertainty reduces the impact effect of demand shocks on investment. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix of adjustment costs, time-varying uncertainty, and aggregation over investment decisions and time, and also empirically for a panel of manufacturing firms. These cautionary effects of uncertainty are large - going from the lower quartile to the upper quartile of the uncertainty distribution typically halves the first year investment response to demand shocks. This implies the responsiveness of firms to any given policy stimulus may be much lower in periods of high uncertainty, such as after major shocks like OPEC I and 9/11.
Book Synopsis The Effect of Uncertainty on Investment, Hiring, and R&D by : Luke C.D. Stein
Download or read book The Effect of Uncertainty on Investment, Hiring, and R&D written by Luke C.D. Stein and published by . This book was released on 2014 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is wide debate over the impact of uncertainty on firm behavior, due to the difficulty both of measuring uncertainty and of identifying causality. This paper takes three steps that attempt to address these challenges. First, we develop an instrumental variables strategy that exploits firms' differential exposure to energy and currency prices and volatility. For example, airlines are negatively affected by high oil prices while oil refiners benefit from them, but both are sensitive to oil price volatility; retailers, in comparison, are not particularly sensitive to either the level or volatility of oil prices. Second, we use the expected volatility of stock prices as implied by equity options to obtain forward-looking measures of uncertainty over firms' business conditions. Finally, we examine how uncertainty affects a range of outcomes: capital investment, hiring, research and development, and advertising. We find that uncertainty depresses capital investment, hiring, and advertising, but encourages R&D spending. This perhaps-surprising result for R&D is consistent with a theoretical literature emphasizing that long investment lags create valuable real put options which offset the effects of call options lost when projects are started. Aggregating across our panel of Compustat firms, we find that rising uncertainty accounts for roughly a third of the fall in capital investment and hiring that occurred in 2008-10.
Book Synopsis Investment, Capital Market Imperfections, and Uncertainty by : Robert Lensink
Download or read book Investment, Capital Market Imperfections, and Uncertainty written by Robert Lensink and published by Edward Elgar Publishing. This book was released on 2001-01-01 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents an up-to-date overview of the theory as well as the empirics of the relationship between investment, financial imperfections and uncertainty. After reviewing the capital market imperfections literature and the empirical results, the authors discuss both traditional investment models with uncertainty and the more modern option based models. They present an overview of empirical results of the modelling of investment under uncertainty. In these examples the effects of capital market imperfections on investment are carefully considered. The authors conclude that there is overwhelming empirical support for a negative uncertainty-investment relationship. This book should appeal to academics with an interest in investment theory, professionals in the financial sector and students of macroeconomics and finance. "Investment, Capital Market Imperfections, and Uncertainty" assumes only a basic knowledge of mathematics and is easily accessible.
Book Synopsis The Impact of Uncertainty on Investment by : Mark Jan-Jochem Koetse
Download or read book The Impact of Uncertainty on Investment written by Mark Jan-Jochem Koetse and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling by :
Download or read book The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling written by and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Electric Power Annual written by and published by . This book was released on 1990 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: This publication provides industry data on electric power, including generating capability, generation, fuel consumption, cost of fuels, and retail sales and revenue.
Book Synopsis The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling by :
Download or read book The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling written by and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effects of Uncertainty on Investment and the Expected Long-rund Capital Stock by : Andrew B. Abel
Download or read book The Effects of Uncertainty on Investment and the Expected Long-rund Capital Stock written by Andrew B. Abel and published by . This book was released on 1983 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Investment under Uncertainty, Coalition Spillovers and Market Evolution in a Game Theoretic Perspective by : J.H.H Thijssen
Download or read book Investment under Uncertainty, Coalition Spillovers and Market Evolution in a Game Theoretic Perspective written by J.H.H Thijssen and published by Springer Science & Business Media. This book was released on 2006-04-11 with total page 255 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two crucial aspects of economic reality are uncertainty and dynamics. In this book, new models and techniques are developed to analyse economic dynamics in an uncertain environment. In the first part, investment decisions of firms are analysed in a framework where imperfect information regarding the investment's profitability is obtained randomly over time. In the second part, a new class of cooperative games, spillover games, is developed and applied to a particular investment problem under uncertainty: mergers. In the third part, the effect of bounded rationality on market evolution is analysed for oligopolistic competition and incomplete financial markets.
Book Synopsis Investment Under Uncertainty by : Sergei Antoshin
Download or read book Investment Under Uncertainty written by Sergei Antoshin and published by . This book was released on 2007 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: A real options theory - in its classic formulation - suggests that firms invest less during times of high uncertainty, that is, uncertainty depresses investment. However, several theoretical extensions predict that the relationship between investment and uncertainty may be non-linear, or even non-monotonic, when classic model assumptions are violated. Some model parameters either reinforce or weaken the negative effect of uncertainty on investment, while others distort the investment-uncertainty relationship, making it follow an inverted U-curve. This paper is a first - to my knowledge - attempt to identify the factors affecting investment from various streams of theoretical literature on investor choice and uncertainty, and to assemble them in a single empirical framework. By employing a dynamic panel of oil company data and implied volatilities as measures of uncertainty, I am able to examine the impact of uncertainty on investment and the effect of several factors on the investment-uncertainty relationship. I obtain evidence in support of several predictions from the theory. Both economy-wide and firm-specific types of uncertainty, as well as financing constraints, are found to adversely affect investment, while industry-wide uncertainty has an ambiguous effect, depending on the level of output price. In tests for non-linearity in the investment-output price volatility relationship, I find that output price, firm size and its risk management ability weaken the investment-uncertainty relationship. On the other hand, market imperfection, financing constraints, the firm's maturity and its risk aversion re-enforce the negative effect of uncertainty. In addition, adjustment costs seem to be considerable, as firm investment reacts to changes in macroeconomic conditions with a noticeable delay.
Book Synopsis Risk, Uncertainty and Profit by : Frank H. Knight
Download or read book Risk, Uncertainty and Profit written by Frank H. Knight and published by Cosimo, Inc.. This book was released on 2006-11-01 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: A timeless classic of economic theory that remains fascinating and pertinent today, this is Frank Knight's famous explanation of why perfect competition cannot eliminate profits, the important differences between "risk" and "uncertainty," and the vital role of the entrepreneur in profitmaking. Based on Knight's PhD dissertation, this 1921 work, balancing theory with fact to come to stunning insights, is a distinct pleasure to read. FRANK H. KNIGHT (1885-1972) is considered by some the greatest American scholar of economics of the 20th century. An economics professor at the University of Chicago from 1927 until 1955, he was one of the founders of the Chicago school of economics, which influenced Milton Friedman and George Stigler.
Book Synopsis Irreversibility, Uncertainty, and Investment by : Robert S. Pindyck
Download or read book Irreversibility, Uncertainty, and Investment written by Robert S. Pindyck and published by World Bank Publications. This book was released on 1989 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Irreversible investment is especially sensitive to such risk factors as volatile exchange rates and uncertainty about tariff structures and future cash flows. If the goal of macroeconomic policy is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates.
Book Synopsis The Era of Uncertainty by : Francois Trahan
Download or read book The Era of Uncertainty written by Francois Trahan and published by John Wiley & Sons. This book was released on 2011-07-13 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: Macroeconomic Investment Strategies for an Era of Economic Uncertainty “Over the years, François’ insightful analyses of the business cycle has led to market calls that have both benefitted investors on the upside and (more important to many) protected them from losses on the downside. François’ incredible track record in successfully interpreting the trends that can be found in leading indicators and other macroeconomic data have also led to his well deserved reputation as an expert in sector rotation - providing investors on both the long and short side of the market opportunities to profit from his ideas. In my opinion, his most important and influential macro prediction to date was his call in the middle of the last decade when he predicted that the worst housing crisis in American history would soon be upon us, and that it would have far-ranging implications for both the global economy and world financial markets.”
Book Synopsis Variations in the Effect of Uncertainty on Different Types of Investment by : Rajeev K. Goel
Download or read book Variations in the Effect of Uncertainty on Different Types of Investment written by Rajeev K. Goel and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Several recent studies, including those by Pindyck (1991), Pindyck and Solimano (1993), Dixit and Pindyck (1994), Episcopos (1995), and Abel et al. (1996), suggest an important linkage between the effect of uncertainty on investment and the irreversibility of the latter. This paper broadly follows the foregoing tradition, but makes the point that it should be possible to distinguish between investments with different degrees of irreversibility and to relate the effect of uncertainty with the degree of investment irreversibility. A simple empirical illustration is provided by using pooled annual data for 12 OECD countries and estimating fixed-effects models for different types of investments. Although caution is appropriate in interpreting the estimates, the evidence suggests that the adverse effect of uncertainty is more severe on investments that have a greater degree of irreversibility.
