Waiting to Invest: Investment and Uncertainty

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The textbook analysis that accepts all projects with positive net present values as positive is quite generally wrong. The ability to delay a project means that almost every project competes with itself postponed. With uncertain interest rates, even the simplest of projects has an option value. The effect of interest-rate uncertainty on the optimal delay of investment is sizable. This implies that the rate of aggregate investment will depend on both the level of the real interest rate and the degree of interest-rate uncertainty. Furthermore, it is not necessarily true that investment rises with a fall in interest rates.

Journal Information

The Journal of Business ceased publication with the November 2006 issue (Volume 79, Number 6). Founded in 1928, The Journal of Business was the first scholarly journal to focus on business-related research and played a pioneering role in fostering serious academic research about business. However, in appreciation of the increasing specialization in business scholarship, as reflected in the emergence of many specialized business journals, the faculty of the University of Chicago’s Graduate School of Business decided after careful deliberation and extensive dialogue to cease publication of the more broadly focused Journal at the end of 2006, after nearly eight decades of publication by the University of Chicago Press.