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