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2 edition of Optimal investment with costly reversibility found in the catalog.

Optimal investment with costly reversibility

Andrew B. Abel

Optimal investment with costly reversibility

by Andrew B. Abel

  • 87 Want to read
  • 13 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Investments.,
  • Capital investments -- Mathematical models.,
  • Capital -- Mathematical models.

  • Edition Notes

    StatementAndrew B. Able, Janice C. Eberly.
    SeriesNBER working paper series -- working paper no. 5091, Working paper series (National Bureau of Economic Research) -- working paper no. 5091.
    ContributionsEberly, Janice C., National Bureau of Economic Research.
    The Physical Object
    Pagination52 p. :
    Number of Pages52
    ID Numbers
    Open LibraryOL22419555M

    Jun 22,  · My work differs from these papers along several dimensions. First, my article is a multiple-industries economy which features costly reversibility of investment to study the dynamics of Tobin’s q. Second, I model firms whereas they model “projects”.Cited by: 2. The firm-level evidence on costly reversibility is even stronger than the prior evidence at the plant level. The firm-level investment rate distribution is highly skewed to the right, with a small fraction of negative investments, %, a tiny fraction of inactive investments, %, and a large fraction of positive investments, %.

    incorporate the costly reversibility problem into investment decisions to examine the linkage between firm-level investment and stock returns. Zhang () develops a neoclassical industry equilibrium framework with aggregate uncertainty about profitability and shows that firms’ optimal investment can. Total downloads of all papers by Lu Zhang. Skip to main content. Feedback to SSRN. Optimal Investment, Assets-in-Place, Growth Option, Asymmetric Adjustment Cost. The Value Premium Abstract: The Value Premium, Corporate Investment, Assets-in-Place, Growth Option, Costly Reversibility, Rational Expectations Economics. 8. Expected Returns.

    NICHOLAS BIEKPE, PAUL KLUMPES, MARK TIPPETT SUMMARY It is well known that costly reversibility complicates capital investment analysis to the point where closed-form expressions for the value of a firm's investment opportunities seldom exist. Learn more about Chapter 5: Analytic Solutions for the Value of the Option to (Dis)invest on GlobalSpec. My explanation relies on two salient features of the model, costly reversibility and countercyclical price of risk. Costly reversibility implies that firms face higher costs in cutting than in expanding capital.1 Through optimal capital investment, this asymmetry gives rise to cyclical behavior of value and growth betas.


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Optimal investment with costly reversibility by Andrew B. Abel Download PDF EPUB FB2

Note: Citations are based on reference standards. However, formatting rules can vary widely between applications and fields of interest or study. The specific requirements or preferences of your reviewing publisher, classroom teacher, institution or organization should be applied.

Get this from a library. Optimal investment with costly reversibility. [Andrew B Abel; Janice C Eberly; National Bureau of Economic Research.] -- Abstract: Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price.

We derive an explicit analytic solution for optimal. Optimal Investment with Costly Reversibility Andrew B. Abel, Janice C. Eberly. NBER Working Paper No. Issued in April NBER Program(s):The Economic Fluctuations and Growth Program Investment is characterized by costly reversibility when a firm can purchase capital at a.

Oct 01,  · Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price. We solve for the optimal investment of a firm that faces costly reversibility under uncertainty and we extend the Jorgensonian concept of the user cost of Cited by: Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price.

We solve for the optimal investment of a firm that faces costly reversibility under uncertainty and we extend the Jorgensonian concept of the user cost of capital to this simplicityhsd.com by: Optimal Investment with Costly Reversibility Abstract Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price.

We solve for the optimal investment of a firm that faces costly reversibility underCited by: Downloadable (with restrictions). Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price.

We solve for the optimal investment of a firm that faces costly reversibility under uncertainty and we extend the Jorgensonian concept of the user cost of capital to this case. Downloadable (with restrictions). Author(s): Andrew B. Abel & Janice C. Eberly. Abstract: Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price.

We solve for the optimal investment of a firm that faces costly reversibility under uncertainty and we extend the Jorgensonian concept of the user cost of capital. Instantaneous optimal investment decisions with costly and costless simplicityhsd.com Instantaneous optimal investment decisions with costly and costless simplicityhsd.com Instantaneous.

Optimal Investment with Costly Reversibility Created Date: Z. Nov 27,  · Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price.

We solve for the optimal investment of a firm that faces costly reversibility under uncertainty and we extend the Jorgensonian concept of the user cost of capital to this case.

We define and calculate cU and cL as the user costs of capital associated with the Cited by: We consider the optimal capital accumulation policy of a competitive firm operating in the presence of decreasing returns to scale, price uncertainty, and costly reversibility of investment.

1 Abel and Eberly (, ) study firms’ optimal investment with costly reversibility in a partial equilibrium setting.

Ramey and Shapiro () provide direct empirical evidence for costly reversibility. A large portion of the literature on capital investment is devoted to examining theCited by: In this study, we developed a model of optimal capital accumulation under price uncertainty and costly reversibility of investment.

We characterized the optimal accumulation policy of a risk neutral firm facing decreasing return to scale for a broad class of underlying price dynamics and extended previous studies addressing this simplicityhsd.com by: My explanation relies on two salient features of the model, costly reversibility and countercyclical price of risk.

Costly reversibility implies that firms face higher costs in cutting than in expanding capital.1 Through optimal capital investment, this asymmetry gives rise to cyclical behavior of value and growth simplicityhsd.com by: öMmföäflsäafaäsflassflassflas ffffffffffffffffffffffffffffffffffff Discussion€Papers A€General€Theory€of€Optimal€Capital Accumulation€under€Price Cited by: 6.

CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): Firms ’ equilibrium investment behavior explains two seemingly unrelated economic puzzles. Endogenous variation in firms ’ exposures to fundamental risks, resulting from optimal investment behavior, generates both investment-cash flow sensitivity and a countercyclical value premium.

1Abel and Eberly (, ) study firms' optimal investment with costly reversibility in a partial equilibrium setting. Ramey and Shapiro () provide direct empirical evidence for costly reversibility. A large portion of the literature on capital investment is devoted to examining the.

Competition, Productivity, Organization and the Cross Section of ExpectedReturns able. This is generalized in Abel and Eberly () to allow for costly reversibility,and in pressures, leads to a natural, equilibrium industrial organization, and that firms’ optimal investment behavior can be simply characterized in a Q-theoretic.

Dec 12,  · Abel, A.B., and J.C. Eberly. Optimal investment with costly reversibility. Review of Economic Studies – CrossRef Google Scholar.

Abel, A.B., and J.C. Eberly. An exact solution for the investment and value of a firm facing uncertainty, adjustment costs, and irreversibility. Search book. Search within book. Type for. While the primary focus of this proposal is on costly reversibility, it is also recognised that a number of economically significant alternate explanations must be considered in conjunction with testing the source of the value premium.

Fama and French (, ) interpret the book-to-market ratio as a .With costly reversibility, an increase in volatility changes the optimal timing of investment. 2 In addition, following the financial crisis of –, imperfections in financial markets have been explored as a potential mechanism that generates the observed link between uncertainty and investment.

3Cited by: Irreversible investment acknowledges that the value of capital may not be fully recoverable when resold. Optimal investment with costly reversibility. Review of Economic Studies 63, – CrossRef Google Scholar.

Abel, A.B. and Eberly, J.C. An exact solution for the investment and value of a firm facing uncertainty, adjustment.