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The Sigmoidal Investment Function

Listed author(s):
  • Yuzo Honda

    (Osaka University)

  • Kazuyuki Suzuki

    (Meiji University)

Registered author(s):

    Based on the investment theory of Abel and Eberly (1994), we develop an analytical model of adjustment costs, which produces a sigmoidal investment function. We also estimate the piecewise linear investment function, which includes as special cases linear models, models with one threshold, the original model of Abel and Eberly, which has two thresholds, and sigmoidal models. Empirical evidence clearly supports the sigmoidal model. The threshold estimate of Tobin fs q is 0.91. The investment ratio does not respond at value of Tobin fs q below 0.91, but begins to react sensitively as Tobin fs q passes 0.91.

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    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-36.

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    Length: 44 pages
    Date of creation: Nov 2008
    Handle: RePEc:osk:wpaper:0836
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