The Impact of Idiosyncratic Uncertainty When Investment Opportunities Are Endogenous
This paper develops a general equilibrium model to study the impact of aggregate fluctuations in idiosyncratic volatility that incorporates the endogenous determination of investment opportunities. By making investment options more valuable, an increase in volatility encourages the creation of new investment options as well as discourages the exercise of existing ones. If potential entrants are allowed to invest in new idiosyncratic technologies, thereby acquiring options for further investment, the volatility shock increases overall investment and results in an economic boom.
|Date of creation:||Dec 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://economics.emory.edu/home/journals/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:emo:wp2003:1312. 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: (Sue Mialon)
If references are entirely missing, you can add them using this form.