This paper examines the relationship between investment and uncertainty, focusing on the effects of uncertainty on investment decisions. The authors analyze a panel of U.S. manufacturing firms and find that uncertainty has a negative effect on investment, consistent with theories of irreversible investment. They find no evidence for a positive effect via the convexity of the marginal product of capital or for a CAPM-based effect of risk. The results suggest that uncertainty affects investment directly, rather than through covariances with the market. The study also finds that the effect of uncertainty on investment is not related to conventional measures of risk. The authors conclude that irreversibilities are the most likely explanation for the observed relationship between investment and uncertainty. The paper discusses various theories of investment under uncertainty, including those that emphasize the convexity or concavity of the marginal revenue product of capital. The authors use a measure of uncertainty based on the variance of asset returns and find that it has a strong negative influence on investment. The study also explores the implications of different theories of investment under uncertainty, including those that emphasize the substitutability of labor and capital. The results suggest that uncertainty affects investment primarily through its effect on Tobin's q, and that the relationship between investment and uncertainty is not well explained by traditional risk measures. The authors find that the effect of uncertainty on investment is not significant when controlling for Tobin's q, output, and cash flow. The study also finds that firms with higher labor-capital ratios are less affected by uncertainty. Overall, the paper provides evidence that uncertainty has a negative effect on investment, and that this effect is not captured by conventional risk measures. The results support theories of irreversible investment and suggest that uncertainty affects investment directly, rather than through covariances with the market.This paper examines the relationship between investment and uncertainty, focusing on the effects of uncertainty on investment decisions. The authors analyze a panel of U.S. manufacturing firms and find that uncertainty has a negative effect on investment, consistent with theories of irreversible investment. They find no evidence for a positive effect via the convexity of the marginal product of capital or for a CAPM-based effect of risk. The results suggest that uncertainty affects investment directly, rather than through covariances with the market. The study also finds that the effect of uncertainty on investment is not related to conventional measures of risk. The authors conclude that irreversibilities are the most likely explanation for the observed relationship between investment and uncertainty. The paper discusses various theories of investment under uncertainty, including those that emphasize the convexity or concavity of the marginal revenue product of capital. The authors use a measure of uncertainty based on the variance of asset returns and find that it has a strong negative influence on investment. The study also explores the implications of different theories of investment under uncertainty, including those that emphasize the substitutability of labor and capital. The results suggest that uncertainty affects investment primarily through its effect on Tobin's q, and that the relationship between investment and uncertainty is not well explained by traditional risk measures. The authors find that the effect of uncertainty on investment is not significant when controlling for Tobin's q, output, and cash flow. The study also finds that firms with higher labor-capital ratios are less affected by uncertainty. Overall, the paper provides evidence that uncertainty has a negative effect on investment, and that this effect is not captured by conventional risk measures. The results support theories of irreversible investment and suggest that uncertainty affects investment directly, rather than through covariances with the market.