| The traditional macro-economic theory has undergo tow stage development: the Marshall long-term and short-term equilibrium, which is called neoclassical theory and Q theory, which consider investment as a dynamic process. As investment has three attributes: Irreversibility; Uncertainty and The ability to delay investment decisions (choose the right time to invest). The two theory above ignore the third attribute: the ability to delay, that is, if you do not invest immediately, the invest opportunity do not disappear at once. Recognize this attribute lead to new development of macro-economic investment theory: real option approach.Real option theory is not limit to macro-economic as an explanation for company invest behavior, it can apply to every field of investment field. There extensive research about it. This paper classify them based on "a way of thinking—economic explanation—decision tools" and point out the main difference between financial option and real option.Then, this paper view Abel-Eberly's framework as representative real option theory for macro-economic and compare Abel-Eberly's framework with neoclassical theory and Q theory in order to find difference and connection with them. In practice, managers see real option tools can raise the value of uncertainty but in Abel-Eberly's framework, the investment's value relationship between uncertainty is ambiguous.As all known, the Chinese manufacturing sector has achieve huge success in the past twenty years. But how the relationship between invest and uncertainty? How to make invest decision under irreversibility environment? Dose the manager create real option using their vision and experience to raise the value of uncertainty? In order to answer this questions, this paper choose a real option model based Abel-Eberly's framework , use a firm-level panel data set of U.S. companies in the manufacturing sector and use volatility of the firm's equity returns as an index for total uncertainty and comovement as an index for irreversibility. Specifically, the total uncertainty is decomposed into firm uncertainty and market uncertainty based on CAPM model. We find the uncertainty has a formative effect on investment even for the high level irreversibility company. We view this as speculate because we didn't find any support of managers create real option to raise the value of uncertainty. The main course for Chinese manufacturing sector's success may be FDI bringing new technology, marketing and advertisement stratagem. |
