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. Usi...
| Autors principals: | , , |
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| Format: | Working paper |
| Idioma: | English |
| Publicat: |
CEPR
2003
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| _version_ | 1826288815045607424 |
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| author | Bloom, N Bond, S van Reenen, J |
| author_facet | Bloom, N Bond, S van Reenen, J |
| author_sort | Bloom, N |
| collection | OXFORD |
| description | 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. |
| first_indexed | 2024-03-07T02:19:24Z |
| format | Working paper |
| id | oxford-uuid:a362664c-327f-47f4-a144-95530c2d3a30 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T02:19:24Z |
| publishDate | 2003 |
| publisher | CEPR |
| record_format | dspace |
| spelling | oxford-uuid:a362664c-327f-47f4-a144-95530c2d3a302022-03-27T02:26:34ZUncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:a362664c-327f-47f4-a144-95530c2d3a30EnglishDepartment of Economics - ePrintsCEPR2003Bloom, NBond, Svan Reenen, JThis 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. |
| spellingShingle | Bloom, N Bond, S van Reenen, J Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms. |
| title | Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms. |
| title_full | Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms. |
| title_fullStr | Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms. |
| title_full_unstemmed | Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms. |
| title_short | Uncertainty and Company Investment Dynamics: Empirical Evidence for UK Firms. |
| title_sort | uncertainty and company investment dynamics empirical evidence for uk firms |
| work_keys_str_mv | AT bloomn uncertaintyandcompanyinvestmentdynamicsempiricalevidenceforukfirms AT bonds uncertaintyandcompanyinvestmentdynamicsempiricalevidenceforukfirms AT vanreenenj uncertaintyandcompanyinvestmentdynamicsempiricalevidenceforukfirms |