Manufacturing Stocks: Expectations, Risk and Co-Integration

Callen, Tim; Hall, Stephen G.; Henry, S. G. B.

doi:10.2307/2233657

Cited by 40 publications

(16 citation statements)

References 16 publications

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“…The firm seeks to minimize the expected future stream of costs associated with investment decision making, conditional upon all available information Ω t at time t . Since it is difficult to estimate the discount factor, we follow Callen, Hall, and Henry (1990) by setting it to unity for simplicity. This does not affect the general form of the solution to the model.…”

Section: B Dynamic Specificationmentioning

confidence: 99%

Determinants of Private Investment in Malaysia: What Causes the Postcrisis Slumps?

Ang

2010

Contemporary Economic Policy

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"This paper examines the determinants of private investment in Malaysia, with an emphasis on the postcrisis investment slumps. A static private investment function is derived from the neoclassical framework, with appropriate modifications to account for the structural features observed in the country. To introduce dynamics into the model, we adopt a cost minimization problem, which assumes firms optimize investment levels with respect to a quadratic loss function. The results suggest that the availability of financial resources in the economy has a significant positive impact on private investment. Macroeconomic uncertainty exerts a negative influence on the investment climate in the private sector. Both foreign direct investment and public investment are found to have a complementary effect on private investment. Consistent with the prediction of the neoclassical model, a higher level of aggregate output raises private investment, whereas the user cost of capital has the opposite impact." ("JEL" O"16", O"53") Copyright (c) 2009 Western Economic Association International.

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Section: B Dynamic Specificationmentioning

confidence: 99%

Determinants of Private Investment in Malaysia: What Causes the Postcrisis Slumps?

Ang

2010

Contemporary Economic Policy

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“…1 1 See also Callen, Hall and Henry (1990) for an application of GARCH for measuring effects of output volatility on inventory investment. …”

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confidence: 99%

The Impact of Short‐ and Long‐run Exchange Rate Uncertainty on Investment: A Panel Study of Industrial Countries*

Byrne

Davis

2005

Oxf Bull Econ Stat

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We examine the relationship between aggregate investment and exchange rate uncertainty in the G7, using panel estimation and decomposition of volatility derived from the components generalized autoregressive conditionally heteroscedastic (GARCH) model. Our dynamic panel approach takes account of potential cross-sectional heterogeneity, which can lead to bias in estimation. We find that for a poolable subsample of European countries, it is the transitory and not the permanent component of volatility which adversely affects investment. To the extent that short-run uncertainty in the CGARCH model characterizes higher frequency shocks generated by volatile short-term capital flows, these are most deleterious for investment.

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“…Thus, as Gould (1968), Treadway (1971) and Kennan (1979) have pointed out, any model involving optimal distributed lags requires a theory of expectation formation. Recently Callen et al (1990) and Sengupta (1992a, b) have introduced into the adjustment process a quadratic component of costs due to risk associated with the input and output fluctuations. Assuming quadratic adjustment costs the producers' objective is to minimize the expected present value of a quadratic loss function:…”

Section: Introductionmentioning

confidence: 99%