On the Microeconomic Theory of Investment Under Uncertainty [Working Paper]

October 1977 | |
Investment theory is the study of the individual behavior of house­ holds and economic organizations in the allocation of their resources to the available investment opportunities. For the purposes of investment theory, economic organizations are characterized as being members of one of two groups: "business firms" that hold as assets the physical means of production for the economy and finance their production decisions by issuing financial claims or securities; and "financial intermediaries" that hold financial claims as assets and finance these assets by issuing se­curities. Individuals or households are assumed to invest primarily in securities, and therefore invest only indirectly in physical assets. The markets in which these securities are traded are called the capital markets.