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Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms.

Abstract:

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 m...

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Nick Bloom More by this author
Stephen Bond More by this author
John van Reenen More by this author
Volume:
4025
Series:
CEPR Discussion Papers
Publication date:
2003
URN:
uuid:a362664c-327f-47f4-a144-95530c2d3a30
Local pid:
oai:economics.ouls.ox.ac.uk:14568
Language:
English

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