Investment, Capital Market Imperfections, and Uncertainty

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Investment, Capital Market Imperfections, and Uncertainty

Theory and Empirical Results

9781840640854 Edward Elgar Publishing
Robert Lensink, Professor of Finance and Financial Markets, Faculty of Economics and Business, University of Groningen, the Netherlands, Hong Bo, Senior Lecturer in Financial Economics, SOAS, University of London, UK and Elmer Sterken, Professor of Economics, University of Groningen, The Netherlands
Publication Date: January 2002 ISBN: 978 1 84064 085 4 Extent: 168 pp
This book presents an up-to-date overview of the theory as well as the empirics of the relationship between investment, financial imperfections and uncertainty.

After reviewing the capital market imperfections literature and the empirical results, the authors discuss both traditional investment models with uncertainty and the more modern option based models. They present an overview of empirical results of the modelling of investment under uncertainty. In these examples, the effects of capital market imperfections on investment are carefully considered. The authors conclude that there is overwhelming empirical support for a negative uncertainty-investment relationship.

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This book presents an up-to-date overview of the theory as well as the empirics of the relationship between investment, financial imperfections and uncertainty.

After reviewing the capital market imperfections literature and the empirical results, the authors discuss both traditional investment models with uncertainty and the more modern option based models. They present an overview of empirical results of the modelling of investment under uncertainty. In these examples, the effects of capital market imperfections on investment are carefully considered. The authors conclude that there is overwhelming empirical support for a negative uncertainty-investment relationship.

This innovative book will appeal to academics with an interest in investment theory, professionals in the financial sector and students of macroeconomics and finance. Investment, Capital Market Imperfections, and Uncertainty assumes only a basic knowledge of mathematics and is easily accessible.
Contents
Contents: 1. Introduction Part I: Capital Market Imperfections 2. Investment and Capital Market Imperfections: Theory 3. Investment and Capital Market Imperfections: Empirics Part II: Investment under Uncertainty 4. Investment under Uncertainty: Orthodox Models 5. The Option Approach to Investment under Uncertainty 6. Empirics of the Investment Uncertainty Relationship Part III: Conclusion 7. Conclusions Part IV: Appendices A. Derivation of the q and Euler Model B. Utility Functions and Assumptions Regarding Risk C. Ito’s Lemma and Dynamic Programming Bibliography Index
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