The Effect of Uncertainty on Investment: Some Stylized Facts

John Leahy and Toni Whited

No 4986, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The theoretical relationship between investment and uncertainty is ambiguous. This paper briefly surveys the insights that theory has to offer and then runs a series of simple tests aimed at evaluating the empirical significance of various theoretical effects. Our results from a panel of U.S. manufacturing firms indicate a negative effect of uncertainty on investment consistent with theories of irreversible investment. We find no evidence for a positive effect via the channel of the convexity of the marginal product of capital, and we find no evidence for the presence of a CAPM-based effect of risk.

JEL-codes: E2 (search for similar items in EconPapers)
Date: 1995-01
Note: EFG
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Published as Journal of Money Credit and Banking, Vol. 28, no. 1, (February 1996), pp. 64-83.

Downloads: (external link)
http://www.nber.org/papers/w4986.pdf (application/pdf)

Related works:
Journal Article: The Effect of Uncertainty on Investment: Some Stylized Facts (1996)
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:nbr:nberwo:4986

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4986

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().