Time-to-Build and the Inverse U-Shape Investment-Uncertainty Relationship
The effect that investment lags have on the uncertainty-investment relationship is studied by modifying the Bar-Ilan and Strange (1996) model to enable an analytical solution. The following results emerge: (i) If the time lag is sufficiently small, uncertainty affects investment negatively; (ii) A sufficiently large time lag gives rise to an inverse U-shape uncertainty-investment relationship; (iii) When such an inverse U-shape exists, the longer the time lag (or the larger the degree of profit convexity), the wider the range of a positive uncertainty-investment relationship.
Year of publication: |
2008
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Authors: | Maoz Yishay D. |
Published in: |
The B.E. Journal of Theoretical Economics. - De Gruyter, ISSN 1935-1704. - Vol. 8.2008, 1, p. 1-16
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Publisher: |
De Gruyter |
Saved in:
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