NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Investment and Value: A Neoclassical Benchmark

Janice Eberly, Sergio Rebelo, Nicolas Vincent

NBER Working Paper No. 13866
Issued in March 2008
NBER Program(s):   EFG

Which investment model best fits firm-level data? To answer this question we estimate alternative models using Compustat data. Surprisingly, the two best-performing specifications are based on Hayashi's (1982) model. This model's foremost implication, that Q is a sufficient statistic for determining a firm's investment decision, has been often rejected because cash-flow and lagged-investment effects are present in investment regressions. However, we find that these regression results are quite fragile and ineffectual for evaluating model performance. So, forget what investment regressions tell you. Models based on Hayashi (1982) provide a very good description of investment behavior at the firm level.

download in pdf format
   (746 K)

email paper

This paper is available as PDF (746 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13866

Users who downloaded this paper also downloaded these:
Bolton, Chen, and Wang w14845 A Unified Theory of Tobin's q, Corporate Investment, Financing, and Risk Management
Eberly, Rebelo, and Vincent w16889 What Explains the Lagged Investment Effect?
Gomes, Greenwood, and Rebelo w5922 Equilibrium Unemployment
Salinger and Summers Tax Reform and Corporate Investment: A Microeconometric Simulation Study
Justiniano, Primiceri, and Tambalotti w15570 Investment Shocks and Business Cycles
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us