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T. Dangl, Y. Wu:
"Corporate Investment over the Business Cycle";
Review of Finance, 20 (2016), 1; 337 - 371.

The average capital growth rate across firms declines sharply during a recession,
and recovers only slowly. We provide a micro-founded explanation for this and several
new stylized facts of investment asymmetry. Our investment model features
various degrees of reversibility, cyclical macroeconomic shocks, and uncertainty
about the state of the economy. Model simulations replicate strikingly different empirical
patterns of capital growth rates at the aggregate and firm levels, featuring no
slope asymmetry and a positive level asymmetry at the firm level, negative slope
and level asymmetries at the aggregate level, and a positive relation between the industry-level
slope asymmetry and asset illiquidity.

http://dx.doi.org/10.1093/rof/rfv003