Asymmetry and uncertainty in capital formation: an application to oil investment
AbstractTheories of irreversible investment suggest a negative relation between investment and uncertainty, and nonlinear adjustment costs open for asymmetries in the adjustment of fixed capital. We propose an econometric modelling approach to estimate and test the key predictions of modern investment theory, including asymmetric dynamics and various uncertainty indicators. Our application on a data set from the oil industry offers empirical support for both asymmetric dynamics and uncertainty in oil and gas investment.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 43 (2011)
Issue (Month): 28 ()
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Other versions of this item:
- Mohn, Klaus & Osmundsen, Petter, 2008. "Asymmetry and uncertainty in capital formation: An application to oil investment," UiS Working Papers in Economics and Finance 2009/13, University of Stavanger.
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