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Title: Investment and Value: a Neoclassical Benchmark
Authors: Eberly, Janice
Rebelo, Sergio
Vincent, Nicolas
Keywords: Investment
Hayashi
Investment adjustment costs
Tobin's Q
Regime switching
Issue Date: 2009-03
Series/Report no.: Cahiers du CIRPÉE;09-08
Abstract: Do investment models fit firm-level data? - which model fits best? To answer this question we estimate alternative models using Compustat data. We find that both a version of the Hayashi (1982) and a model with decreasing returns to scale in production fit firm-level data very well. Our estimates suggest that there is substantial measurement error in Q. This measurement error implies that the investment-cash-flow regressions that have received so much attention are ineffectual to discriminate among alternative models. In fact, the models that we estimate generate empirically plausible cash-flow and lagged-investment effects even though they were not designed to produce them.
URI: http://132.203.59.36/CIRPEE/cahierscirpee/2009/files/CIRPEE09-08.pdf
https://depot.erudit.org/id/002992dd
Appears in Collections:Cahiers de recherche du CIRPÉE

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