Journal article
Investment under Upstream and Downstream Uncertainty
The Journal of finance (New York), Vol.81(1), pp.413-457
02/2026
DOI: 10.1111/jofi.70010
Abstract
The impact of uncertainty shocks on firm-level economic activity depends on their origin in supply chains. Upstream (downstream) uncertainty from suppliers (customers) is associated with variability over future input (output) prices. Consequently, a real-option production model with time-to-build suggests that only upstream uncertainty suppresses investment, since upstream (downstream) uncertainty affects the shorter (longer) run. Production network data show that upstream uncertainty negatively affects firm-level outcomes. Conversely, downstream uncertainty affects firm-level outcomes more weakly but positively. At the macro level, these two uncertainties oppositely predict aggregate growth and asset prices. Overall, downstream uncertainty has an expansionary effect, in contrast to other facets of uncertainty.
Details
- Title: Subtitle
- Investment under Upstream and Downstream Uncertainty
- Creators
- Fotis GrigorisGill Segal - University of North Carolina at Chapel Hill
- Resource Type
- Journal article
- Publication Details
- The Journal of finance (New York), Vol.81(1), pp.413-457
- DOI
- 10.1111/jofi.70010
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- Publisher
- WILEY
- Language
- English
- Electronic publication date
- 12/22/2025
- Date published
- 02/2026
- Academic Unit
- Finance
- Record Identifier
- 9985113253402771
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