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A threshold uncertainty investment model for the Netherlands

Author

Listed:
  • Hong Bo
  • Jan Jacobs
  • Elmer Sterken

Abstract

This paper presents a threshold uncertainty investment model for Dutch firms. The proposed uncertainty measure is constructed as an empirical proxy for the standard real options multiple. The uncertainty measure serves as the threshold variable in estimating a piecewise linear accelerator investment model using Hansen's panel data threshold estimation procedure. It is found that in the regime of low uncertainty in which the empirical proxy for the real options multiple is below the estimated threshold, the estimated accelerator effect on investment is higher than that in the regime of high uncertainty. The result indicates that firms delay investment due to positive values of waiting.

Suggested Citation

  • Hong Bo & Jan Jacobs & Elmer Sterken, 2006. "A threshold uncertainty investment model for the Netherlands," Applied Financial Economics, Taylor & Francis Journals, vol. 16(9), pages 665-673.
    • Handle: RePEc:taf:apfiec:v:16:y:2006:i:9:p:665-673
    DOI: 10.1080/09603100600685002
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    References listed on IDEAS

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    1. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
    2. Robert S. Pindyck & Andrés Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 259-318, National Bureau of Economic Research, Inc.
    3. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    4. Catherine Pattillo, 1998. "Investment, Uncertainty, and Irreversibility in Ghana," IMF Staff Papers, Palgrave Macmillan, vol. 45(3), pages 522-553, September.
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    Cited by:

    1. Ekaterina Kuzmicheva & Kirill Kuzmichev, 2013. "The influence of financial constraints and real options on corporate investment decisions," HSE Working papers WP BRP 17/FE/2013, National Research University Higher School of Economics.
    2. Ekaterina E. Kuzmicheva, 2014. "The Influence Of Financial Constraints And Attitude Towards Risk In Corporate Investment Decisions," HSE Working papers WP BRP 36/FE/2014, National Research University Higher School of Economics.
    3. Jan Jacobs & Gerard Kuper & Daan van Soest, 2009. "On the effect of high energy prices on investment," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3483-3490.

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