EconPapers    
Economics at your fingertips  
 

Waiting to Invest: Investment and Uncertainty

Ingersoll, Jonathan E, and Stephen Ross

The Journal of Business, 1992, vol. 65, issue 1, 1-29

Abstract: The textbook analysis that accepts all projections with positive net present values as positive is quite generally wrong. The ability to delay a project means that almost every project competes with itself postponed. With uncertain interest rates, even the simplest of projects has an option value. The effect of interest-rate uncertainty on the optimal delay of investment is sizable. This implies that the rate of aggregate investment will depend on both the level of the real interest rate and the degree of interest-rate uncertainty. Furthermore, it is not necessarily true that investment rises with a fall in interest rates. Copyright 1992 by University of Chicago Press.

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (167) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/296555 full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:65:y:1992:i:1:p:1-29

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2023-01-28
Handle: RePEc:ucp:jnlbus:v:65:y:1992:i:1:p:1-29