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Uncertainty and investment evidence from a panel of Chinese firms

  • Abdul-Haque
  • Shaoping, Wang
Registered author(s):

    Using data from various Chinese companies for the period 1994-2005 and applying GMM (System) technique, we report some stylized facts regarding the link between uncertainty and investment, where uncertainty is measured as the volatility of daily stock market returns. Controlling for the short- and long-run investment dynamics, we discover important effects of measured uncertainty on firm-level investment. Our study consistently indicates a positive and statistically significant effect of uncertainty on the company investment. Further more the macroeconomic and firm-specific components of uncertainty also have a significant positive effect on their own. Higher risk perception leading to higher investment, and in turn stronger aspirations of reinvestment.

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    File URL: http://www.sciencedirect.com/science/article/B6VFN-4RHFVCV-1/1/f0022bc2d2f54bd04c597234a29630be
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    Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

    Volume (Year): 19 (2008)
    Issue (Month): 3 (September)
    Pages: 237-248

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    Handle: RePEc:eee:streco:v:19:y:2008:i:3:p:237-248
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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    8. R. Glenn Hubbard, 1994. "Investment under Uncertainty: Keeping One's Options Open," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1816-1831, December.
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