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| Author: | Dunne, T. Mu, X. |
| Title: | Investment spikes and uncertainty in the petroleum refining industry |
| Journal: | Journal of Industrial Economics
2010 : MAR, VOL. 58:1, p. 190-213 |
| Index terms: | investments decision making uncertainty models commodity futures USA petroleum industry petrochemicals industry |
| Freeterms: | petroleum refineries |
| Language: | eng |
| Abstract: | This paper explores the effect of uncertainty on the investment decisions of petroleum refineries in the U.S. Uncertainty measures are built from the commodity futures market, using data on actual capacity changes in order to measure investment episodes. Since capacity changes in U.S. refineries occur infrequently, the investment process is empirically modeled using hazard models. An increase in uncertainty decreases the probability of a refinery possibly adjusting its capacity. The findings support theories underlining the role of irreversibility in investment decisions. |
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