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The Present Value of Profits and Cyclical Movements in Investment
Abstract
Most of the empirical work on investment is based on the existence of a relation between investment and the expected present val of marginal profits.Thus, in this paper we compute such a present value series, under various assumptions about demand and technology and examine its relation to investment.We find that variations in this present value series are, surprisingly,due more to variations in the cost of capital than to variations in marginal profit. We also find that the present value series, although significantly related to investment, still leaves unexplained a large, serially correlated fraction of investment.
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Citations
Cited by
Financing Constraints and Corporate Investment
Fazzari, S., Hubbard, R. G., & Petersen, B. (1987) · National Bureau of Economic Research · doi:10.3386/w2387 · Cited by 4,351
The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks
Romer, C. D., & Romer, D. H. (2010) · American Economic Review · doi:10.1257/aer.100.3.763 · Cited by 2,091
Production‐Based Asset Pricing and the Link Between Stock Returns and Economic Fluctuations
COCHRANE, J. H. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb03750.x · Cited by 1,123
The Stock Market and Corporate Investment: A Test of Catering Theory
Polk, C., & Sapienza, P. (2009) · Review of Financial Studies · doi:10.1093/rfs/hhn030 · Cited by 744
Bond, S., Elston, J. A., Mairesse, J., & Mulkay, B. (2003) · Review of Economics and Statistics · doi:10.1162/003465303762687776 · Cited by 532
Metadata
- Authors
- Abel, A. B., & Blanchard, O. J.
- Venue
- Econometrica
- Publisher
- JSTOR
- Published
- 1986-03
- Volume
- 54
- Issue
- 2
- Pages
- 249
- ISSN
- 0012-9682 (ISSN-L)
- OpenAlex
- W2009236937
- Cited by
- 423
- References
- 0
- FWCI
- 24.20
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: The Present Value of Profits and Cyclical Movements in Investment. https://app.cochat.ai/papers/10.2307/1913150
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- Abel, A. B., & Blanchard, O. J. (1986). The Present Value of Profits and Cyclical Movements in Investment. Econometrica. https://doi.org/10.2307/1913150
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
