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Bond vs stock market's Q: Testing for stability across frequencies and over time

Marco Gallegati and James B. Ramsey

Journal of Empirical Finance, 2013, vol. 24, issue C, 138-150

Abstract: In this paper we revisit the evidence recently provided by Philippon (2009) about the relationship among bond market's Q, stock market's Q and aggregate investments for the US. Specifically, we analyze the stability of the relationship between aggregate investment and the two measures of Q across frequencies and over time. We find that the relationship between aggregate investment and stock market's Q, in contrast to that with bond market's Q, is both frequency-dependent and time-varying. Both the successfulness of bond market's Q and the poor performance of the usual Tobin's Q can be explained by taking into account stability across frequencies of the first and instability over time of the latter.

Keywords: Wavelet transform; Tobin's Q; Bond market's Q; Time-varying relationship (search for similar items in EconPapers)
JEL-codes: C14 C29 C52 E22 E44 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:24:y:2013:i:c:p:138-150

DOI: 10.1016/j.jempfin.2013.10.003

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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