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@techreport{NBERw1484,
title = "A Stochastic Model of Investment, Marginal q and the Market Value of theFirm",
author = "Andrew B. Abel",
institution = "National Bureau of Economic Research",
type = "Working Paper",
series = "Working Paper Series",
number = "1484",
year = "1984",
month = "October",
doi = {10.3386/w1484},
URL = "http://www.nber.org/papers/w1484",
abstract = {This paper presents closed-form solutions for the investment and valuation of a competitive firm with a Cobb-Douglas production function and a constant elasticity adjustment cost function in the presence of stochastic prices for output and inputs. The value of the firm is a linear function of the capital stock. The optimal rate of investmentis an increasing function of the slope of the value function with respect to the capital stock (marginal q). A mean preserving spread of the distribution of future price increases investment. An increase in the scale of the random component of a price can increase, decrease or not affect the rate of investment depending on the sign of the covariance of this price with a weighted average of all prices.},
}