TY  - JOUR
AU  - Leahy,John V.
AU  - Whited,Toni M.
TI  - The Effect of Uncertainty on Investment: Some Stylized Facts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4986
PY  - 1995
Y2  - January 1995
UR  - http://www.nber.org/papers/w4986
L1  - http://www.nber.org/papers/w4986.pdf
N1  - Author contact info:
John V. Leahy
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/992-9770
E-Mail: john.leahy@nyu.edu

Toni Whited
University of Rochester
William E. Simon Graduate School of Business Admin
Rochester, NY  14627
E-Mail: toni.whited@simon.rochester.edu
AB  - The theoretical relationship between investment and uncertainty is ambiguous.  This paper briefly surveys the insights that theory has to offer and then runs a series of simple tests aimed at evaluating the empirical significance of various theoretical effects.  Our results from a panel of U.S. manufacturing firms indicate a negative effect of uncertainty on investment consistent with theories of irreversible investment.  We find no evidence for a positive effect via the channel of the convexity of the marginal product of capital, and we find no evidence for the presence of a CAPM-based effect of risk.
ER  -