Investment and Value: a Neoclassical Benchmark

Janice Eberly, Sergio Rebelo () and Nicolas Vincent

Cahiers de recherche from CIRPEE

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.

Keywords: Investment; Hayashi; Investment adjustment costs; Tobin's Q; Regime switching (search for similar items in EconPapers)
JEL-codes: D92 E22 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-bec and nep-mac
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Investment and Value: A Neoclassical Benchmark (2008)
Working Paper: Investment and Value: A Neoclassical Benchmark (2008)
Working Paper: Investment and Value: A Neoclassical Benchmark (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:0908

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