The effect of uncertainty on investment
Subtitle: evidence from Texas oil drilling
By: Ryan Kellogg
Contributors: National Bureau of Economic Research
Series: NBER working paper series -- working paper 16541; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16541.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "Despite widespread application of real options theory in the literature, the extent to which firms actually delay irreversible investments following an increase in the uncertainty of their environment is not empirically well-known.  This paper estimates firms' responsiveness to changes in uncertainty using detailed data on oil well drilling in Texas and expectations of future oil price volatility derived from the NYMEX futures options market.  Using a dynamic model of firms' investment problem, I find that oil companies respond to changes in expected price volatility by adjusting their drilling activity by a magnitude consistent with the optimal response prescribed by theory"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 3/24/2011.

Includes bibliographical references.

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