Contrasts between classes of assets in fixed investment panel equations as a way of testing real option theory
AbstractThis paper reports estimation of investment equations for two classes of fixed assets: plant & machinery and building for a large sample of UK manufacturing industries. It exploits the different degree of irreversibility that characterises these assets to test the power of real options theory to explain investment under uncertainty. Additionally, the paper uses a specially constructed industry-specific measure of irreversibility for plant and machinery investment to test for real options effects within that class of investment.
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Bibliographic InfoPaper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number B3-3.
Date of creation: Mar 2002
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Investment; Industry; Irreversibility; Real Options; Uncertainty;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-04 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ferderer, J Peter, 1993. "The Impact of Uncertainty on Aggregate Investment Spending: An Empirical Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 30-48, February.
- MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983.
"Tests for model specification in the presence of alternative hypotheses : Some further results,"
Journal of Econometrics,
Elsevier, vol. 21(1), pages 53-70, January.
- Russell Davidson & James G. MacKinnon, 1981. "Tests for Model Specification in the Presence of Alternative Hypotheses: Some Further Results," Working Papers 430, Queen's University, Department of Economics.
- Konstantinos Drakos, 2006. "A note on uncertainty and investment across the spectrum of irreversibility," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 873-876.
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