Resource title

Fundamentals, misvaluation, and investment: the real story

Resource image

image for OpenScout resource :: Fundamentals, misvaluation, and investment: the real story

Resource description

Is real investment fully determined by fundamentals or is it sometimes affected by stock market misvaluation? We introduce three new tests that: measure the reaction of investment to sales shocks for firms that may be overvalued; use Fama-MacBeth regressions to determine whether overinvestment affects subsequent returns; and analyze the time path of the marginal product of capital in reaction to fundamental and misvaluation shocks. Besides these qualitative tests, we introduce a measure of misvaluation into standard investment equations to estimate the quantitative effect of misvaluation on investment. Overall, the evidence suggests that both fundamental and misvaluation shocks affect investment.

Resource author

Robert S. Chirinko, Huntley Schaller

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25967

Resource license

Adapt according to the presented license agreement and reference the original author.