01679cam a22002297 4500001000600000003000500006005001700011008004100028100002000069245012300089260006600212490004100278500001800319520075200337530006101089538007201150538003601222710004201258830007601300856003701376856003601413w1484NBER20170124195902.0170124s1984 mau||||fs|||| 000 0 eng d1 aAbel, Andrew B.12aA Stochastic Model of Investment, Marginal q and the Market Value of theFirmh[electronic resource] /cAndrew B. Abel. aCambridge, Mass.bNational Bureau of Economic Researchc1984.1 aNBER working paper seriesvno. w1484 aOctober 1984.3 aThis 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. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w1484.4 uhttp://www.nber.org/papers/w148441uhttp://dx.doi.org/10.3386/w1484