financial frictions induces the standard real-options effects on investment and hiring, but also leads firms to hoard cash …, further reducing investment and hiring. We then test the model using a panel of US firms and a novel instrumentation strategy …

find that policy uncertainty raises stock price volatility and reduces investment and employment in policy … foreshadow declines in investment, output, and employment in the United States and, in a panel VAR setting, for 12 major …

We develop a model of investment timing under uncertainty for a financially constrained firm. Facing external financing … costs, the firm prefers to fund its investment through internal funds, so that the firm's optimal investment policy and …, and at times as a substitute, to the real flexibility given by the optimal timing of investment. We show that: 1) the …

investment; the impact of uncertainty on investment occurs primarily through changes in credit spreads; and innovations in credit … spreads have a strong effect on investment, irrespective of the level of uncertainty. These findings raise a question … financial shocks. By influencing the effective supply of credit, both types of shocks exert a powerful effect on investment and …

What is the best way to incorporate a risk premium into the discount rate schedule for a real investment project with … uncertain payoffs? The standard CAPM formula suggests a beta-weighted average of the return on a safe investment and the mean … return on an economy-wide representative risky investment. Suppose, though, that the project constitutes a tail …

public sector, it may be economically rational for those at risk not to invest in protective measures. Risk management …. These may include multi-year insurance contracts, well-enforced regulations, third-party inspections, and alternative risk …

returns by aggregate investment and valuation ratios; and v) a downward sloping term structure of risk premia for dividend … firm characteristics - Tobin's Q, past investment, earnings-price ratios, market betas, and idiosyncratic volatility of … the firm's exposure to IST shocks and risk premia. Our calibrated model replicates: i) the predictability of returns by …

future oil price volatility derived from the NYMEX futures options market. Using a dynamic model of firms' investment problem …

investment. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed … both numerically for a model with a rich mix of adjustment costs, time-varying uncertainty, and aggregation over investment … investment response to demand shocks. This implies the responsiveness of firms to any given policy stimulus may be much lower in …

We re-examine the basic investment problem of deciding when to incur a sunk cost to obtain a stochastically fluctuating … benefit. The optimal investment rule satisfies a trade-off between a larger versus a later net benefit; we show that this … demand curve. We reinterpret the optimal investment rule as a markup formula involving an elasticity that has exactly the …