IDEAS home Printed from
   My bibliography  Save this paper

Contrasts between classes of assets in fixed investment panel equations as a way of testing real option theory


  • Ciaran Driver

    () (Imperial College Management School)

  • Katsushi Imai

    (Imperial College Management School)

  • Paul Temple

    (Department of Economics, University of Surrey)

  • Giovanni Urga

    (City University Business School)


This 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.

Suggested Citation

  • Ciaran Driver & Katsushi Imai & Paul Temple & Giovanni Urga, 2002. "Contrasts between classes of assets in fixed investment panel equations as a way of testing real option theory," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B3-3, International Conferences on Panel Data.
  • Handle: RePEc:cpd:pd2002:b3-3

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. 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.
    2. 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.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. 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.

    More about this item


    Investment; Industry; Irreversibility; Real Options; Uncertainty;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpd:pd2002:b3-3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sune Karlsson). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.