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...

Recent empirical studies suggest that the negative effects of uncertainty shocks are stronger in recessions than during booms. In this study, I provide a theoretical mechanism that can explain this empirical observation. I start from the argument that the effect of uncertainty on investment...