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Discovering the Link Between Uncertainty and Investment - Microeconometric Evidence from Germany

  • Hjalmar Boehm

    (Universitaet Hamburg)

  • Michael Funke

    (Universitaet Hamburg)

  • Nikolaus A. Siegfried

    (Universitaet Hamburg)

We analyse empirically the effect of uncertainty on the investment decisions of a sample of quoted German firms. The uncertainty measures are constructed by employing two procedures: the conventional formula of standard deviation, and the GARCH methodology. We find that uncertainty exerts a significantly negative effect on investment, i.e. uncertainty slows down capital accumulation. We also find that this negative relationship is closely related to the degree of market power of the firm.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0112.

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Date of creation: 01 Aug 2000
Date of revision:
Handle: RePEc:ecm:wc2000:0112
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