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The Stock Market, Profit, and Investment
Abstract
Should managers, when taking investment decisions, follow the signals given by the stock market even when those do not coincide with their own assessment of fundamentals? Do they? In this paper we review theoretical arguments and examine the empirical evidence. First, we look at the relation between investment, market valuation, and proxies for fundamentals over the last 90 years. Second, we look at the behavior of investment during the episodes associated with the crashes of 1929 and 1987. We find a limited role of market valuation, given fundamentals.
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Cited by
Chapter 18 A survey of behavioral finance
Barberis, N., & Thaler, R. (2003) · Handbook of the Economics of Finance · doi:10.1016/s1574-0102(03)01027-6 · Cited by 1,441
Dynamic Investment Models and the Firm's Financial Policy
Bond, S., & Meghir, C. (1994) · The Review of Economic Studies · doi:10.2307/2297978 · Cited by 979
Do stock market liberalizations cause investment booms?
Henry, P. B. (2000) · Journal of Financial Economics · doi:10.1016/s0304-405x(00)00073-8 · Cited by 864
When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms
Baker, M., Stein, J., & Wurgler, J. (2002) · National Bureau of Economic Research · doi:10.3386/w8750 · Cited by 785
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
Metadata
- Authors
- Blanchard, O., Rhee, C., & Summers, L.
- Venue
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 1993-02-01
- Volume
- 108
- Issue
- 1
- Pages
- 115-136
- ISSN
- 0033-5533 (ISSN-L)
- 1531-4650
- OpenAlex
- W2890884722
- Cited by
- 636
- References
- 0
- FWCI
- 43.70
- Type
- journal article
- Language
- en
- Open access
- closed
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- Blanchard, O., Rhee, C., & Summers, L. (1993). The Stock Market, Profit, and Investment. The Quarterly Journal of Economics. https://doi.org/10.2307/2118497
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
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.
