TY  - JOUR
AU  - Gilchrist,Simon
AU  - Himmelberg,Charles P.
AU  - Huberman,Gur
TI  - Do Stock Price Bubbles Influence Corporate Investment?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10537
PY  - 2004
Y2  - June 2004
UR  - http://www.nber.org/papers/w10537
L1  - http://www.nber.org/papers/w10537.pdf
N1  - Author contact info:
Simon Gilchrist
Department of Economics
Boston University
270 Bay State Road
Boston, MA  02215
Tel: 617/353-6824
Fax: NA
E-Mail: sgilchri@bu.edu

Charles Himmelberg
Goldman, Sachs & Co.
Global Investment Research, 22nd floor
200 West Street
New York, NY 10004
Tel: 917-343-3218
E-Mail: charles.himmelberg@gs.com

Gur Huberman
Columbia Business School
3022 Broadway, Uris Hall 807
New York, NY
Tel: 212/854-4100
Fax: 212-662-8474
E-Mail: gh16@columbia.edu
AB  - Building on recent developments in behavioral asset pricing, we develop a model in which dispersion of investor beliefs under short-selling constraints drives a firm's stock price above its fundamental value. Managers optimally respond to the stock market bubble by issuing new equity. The bubble reduces the user-cost of capital and increase real investment. Using the variance of analysts' earnings forecasts as a proxy for the dispersion of investor beliefs, we find strong empirical support for the model's key prediction that increases in dispersion cause increases in new equity issuance, Tobin's Q, and real investment.
ER  -