Inventory Investment and the Cost of Capital

Selale Tuzel and Christopher S. Jones
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Selale Tuzel: USC
Christopher S. Jones: USC

No 298, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: of a higher depreciation rate, which makes inventory riskier than fixed capital. In support of this result, our empirical work documents that risk premia, rather than real interest rates, are negatively related to future inventory growth. This relation is highly significant and robust to a number of variations in estimation method, inventory type, and risk premia proxy. Furthermore, the effect is stronger for durable goods, whose sales are highly procyclical, than for nondurables, and for industries whose sales are more procyclical.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed009:298

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