Pursuing the wrong options? Adjustment costs and the relationship between uncertainty and capital accumulation

Abel and Eberly (1999) prove that uncertainty has an ambiguous effect on long run capital accumulation in a real options model. We show that, with adjustment costs quadratic in investment, more uncertainty reduces capital and this effect may be large.

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Year of publication:	2011-06
Authors:	Bond, Stephen ; Soderbom, Mans ; Wu, Guiying

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Type of publication:	Article
Language:	English
Notes:	Bond, Stephen, Soderbom, Mans and Wu, Guiying (2011) Pursuing the wrong options? Adjustment costs and the relationship between uncertainty and capital accumulation. Economics Letters, 111 (3). pp. 249-251.
Other identifiers:	10.1016/j.econlet.2011.01.020 [DOI]
Source:	BASE

Persistent link: https://www.econbiz.de/10011425215