This study uncovers a statistically significant negative correlation between volatility and private investment over the 1970-93 period in a set of almost fifty developing countries and provides a possible interpretation of this result by using the disappointment- aversion expected utility...

This paper revisits the Home Bias Puzzle -- the relatively low interna- tional diversification of portfolios. We suggest that part of the diversifi- cation puzzle may be due to reliance on the conventional CAPM model as the benchmark predicting patterns of diversification. We compare the asset...

This paper studies the effect of policy uncertainty on the formation of new activities in Romer's (1994) type of an economy, where productivity of labor increases with the number of capital goods. Adding a new capital good requires a capital specific set-up cost, invested prior to using the...

Recent literature has highlighted the importance of new activities in development and growth. It was shown that trade distortions such as tariffs are associated with first-order costs stemming from the induced drop in the formation of new activities. This paper demonstrates that uncertainty may...

This paper studies the endogenous determination of pricing to market, in a model with time dependent transportation costs, where the future terms of trade are random. Allowing time dependent transportation costs adds a dimension of investment to the pre-buying of imports, implying that financial...