Neoclassical investment decision criteria suggest that only the systematic component of total uncertainty affects the rate of investment, as channeled through built asset price. Alternatively, option-based investment models suggest a direct role for total uncertainty in investment decision...

This paper empirically examines the relationship between uncertainty and investment using commercial real estate data. To sort out long-versus short-run effects of asset volatility on investment decisions, we extend the standard real options model to determine the probability of investment over...