Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms
Nicholas Bloom (),
Stephen Roy Bond and
John van Reenen ()
No 4025, CEPR Discussion Papers from C.E.P.R. Discussion Papers
This Paper investigates the empirical relationship between uncertainty and investment dynamics. This is motivated by the real options literature, which suggests a weaker response of investment to demand shocks at higher levels of uncertainty, as firms place a greater value on the option to wait. Using simulated data we show that this more cautious behaviour can be detected as a smaller impact of sales growth on investment for firms facing higher uncertainty. Using a stock returns volatility measure of uncertainty for a large panel of quoted UK companies, we find a similar interaction effect in our econometrics analysis.
Keywords: investment; panel data; real options; uncertainty (search for similar items in EconPapers)
JEL-codes: C23 D80 D92 E22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
References: Add references at CitEc
Citations View citations in EconPapers (13) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:4025
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=4025
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ..
Series data maintained by (). This e-mail address is bad, please contact .