Oil Price Shocks, Firm Uncertainty and Investment
AbstractIt is found that an oil price shock in interaction with a firm’s stock price volatility has a negative effect on investment by that firm, both in the short and long-term. In the presence of this interaction term, linear variables in oil price shocks are not statistically significant. There is evidence that for the short-term effects of the interaction variable, the particular magnitude of an oil price shock may not be as important as the fact that there is an oil price shock. For the long-term effects, however, the magnitude of the oil price shock does matter. Over a longer horizon, oil price shocks depress investment more at firms facing greater uncertainty. An increase in firm stock price volatility continues to reduce the link between sales growth and investment in the presence of oil price shocks as in Bloom et al. (2007).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 49044.
Date of creation: 01 Sep 2010
Date of revision:
Oil price shocks; firm uncertainty; stock price volatility; investment;
Other versions of this item:
- Lee, Kiseok & Kang, Wensheng & Ratti, Ronald A., 2011. "Oil Price Shocks, Firm Uncertainty, And Investment," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 416-436, November.
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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