Investment, Uncertainty, and Liquidity*

Liquidity Preference under Uncertainty: a Model of Dynamic Investment in Illiquid Assets

The paper presents a mathematical model of optimal investment in illiquid assets. Specifically, the model addresses the problem of an investor with limited capital resources, who makes sequential decisions on long-term investments under uncertainty as to future opportunities. The model demonstrates that such an investor will optimally demand a higher rate of return on investments in long-term, ...

Liquidity Preference and Information

This note explores the link between anticipated information and a preference for liquidity in investment choices. Given a subjective ordering of investment portfolios by their liquidity, we identify a sufficient condition under which the prospect of finer resolution of uncertainty creates a preference for more liquid positions. We then show how this condition might arise naturally in some stand...

INVESTMENT UNDER FINANCIAL LIBERALIZATION: CHANNELS OF LIQUIDITY AND UNCERTAINTY A Dissertation Presented by ARMAĞAN GEZICI

Decentralized Production and Public Liquidity with Private Information

Firms with private information about the outcomes of production under uncertainty may face capital (liquidity) constraints that prevent them from attaining efficient levels of investment in a world with costly and/or imperfect monitoring. As an alternative, we examine the efficiency of a simple pooling scheme designed to provide a public (cooperative) supply of liquidity that results in the fir...

Does Science Make a Difference? Investment, Finance and Corporate Governance in German Industries

This paper examines the impact of industry knowledge conditions, firm size and corporate governance structures on tangible investment and its financing. Based on a large panel data set of German firms we investigate whether liquidity constraints vary systematically across firms engaged in activities reflecting very different knowledge conditions. In particular, we compare the extent of liquidit...