Capital risk and models of investment behaviour

  • Robert S. Pindyck
Part of the International Studies In Economic Modelling book series (ISIM)


Most investment expenditures are at least partly irreversible - although capital in place can be sold from one firm to another, its scrap value is often small because it has no alternative use other than that originally intended for it. An emerging literature has shown that this makes investment decisions highly sensitive to uncertainty over future market conditions, and in theory changes in risk levels should strongly affect investment spending. However, explicit measures of risk are usually missing from empirical investment models.


Stock Return Investment Behaviour Capital Risk Investment Expenditure Real Investment 
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© Chapman and Hall Ltd 1988

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  • Robert S. Pindyck

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