The Sigmoidal Investment Function
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.
|Date of creation:||Nov 2008|
|Date of revision:|
|Contact details of provider:|| Web page: http://www2.econ.osaka-u.ac.jp/library/global/e_HP/e_g_shiryo.html|
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