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Inventory Investment and the Cost of Capital

Author

Listed:
  • Selale Tuzel

    (USC)

  • Christopher S. Jones

    (USC)

Abstract

of a higher depreciation rate, which makes inventory riskier than fixed capital. In support of this result, our empirical work documents that risk premia, rather than real interest rates, are negatively related to future inventory growth. This relation is highly significant and robust to a number of variations in estimation method, inventory type, and risk premia proxy. Furthermore, the effect is stronger for durable goods, whose sales are highly procyclical, than for nondurables, and for industries whose sales are more procyclical.

Suggested Citation

  • Selale Tuzel & Christopher S. Jones, 2009. "Inventory Investment and the Cost of Capital," 2009 Meeting Papers 298, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:298
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    References listed on IDEAS

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