The Effect of Uncertainty on Investment Empirical evidence from listed Norwegian firms 2005-2018
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- Master Thesis 
The relationship between uncertainty and investment is an extensively explored topic in economic and financial literature. Regardless, the dramatic events of recent years have reinvigorated the need to garner a greater understanding of this relationship. Diverse and often competing theoretical literature on the effects of uncertainty on investment has not managed to provide a conclusive answer on the direction of this relationship, underscoring the need for additional empirical research. This thesis aims to investigate the relationship between uncertainty and investment on a panel of listed Norwegian firms from 2005 to 2018. In addition, we analyse potential differences in the direction and magnitude of this relationship between business sectors. Controlling for both firm-specific and macro-specific characteristics, we find evidence of a negative relationship between both firm-specific and an aggregate uncertainty on firm-level investment. Furthermore, when conducting a comparative analysis, we observe indications that there are differences in the magnitude of the effect between business sectors. Lastly, our results suggest that manufacturing firms are less responsive to demand shocks during times of higher uncertainty. Our findings shed light on the effect of uncertainty on firm investment behaviour in a Norwegian context. As with earlier empirical literature, our findings could have important implications for fiscal and monetary policy.