Bond, Stephen R.Söderbom, MånsWu, Guiying2010-05-172010-05-172010-05-171403-2465http://hdl.handle.net/2077/22358Abel and Eberly (1999) show that the effect of uncertainty on long run capital accumulation is ambiguous in a real options model with irreversible investment. We show that a higher level of uncertainty tends to reduce expected capital stock levels in a model with strictly convex adjustment costs. Simulations suggest that this negative impact of uncertainty on cap- ital accumulation may be substantial. We also provide some intuition for this result.engUncertaintyreal optionsadjustment costscapital accumulationText