TY  - JOUR
AU  - Eberly,Janice
AU  - Rebelo,Sergio
AU  - Vincent,Nicolas
TI  - Investment and Value: A Neoclassical Benchmark
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13866
PY  - 2008
Y2  - March 2008
UR  - http://www.nber.org/papers/w13866
L1  - http://www.nber.org/papers/w13866.pdf
N1  - Author contact info:
Janice C. Eberly
Northwestern University
Department of Finance
Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/467-1840
Fax: 847/491-5719
E-Mail: eberly@kellogg.northwestern.edu

Sergio Rebelo
Northwestern University
Kellogg School of Management
Department of Finance
Leverone Hall
Evanston, IL  60208-2001
Tel: 847/467-2329
Fax: 847/491-5719
E-Mail: s-rebelo@northwestern.edu

Nicolas Vincent
HEC Montreal
Montreal, Quebec
Canada
E-Mail: nicolas.vincent@hec.ca
AB  - 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.
ER  -