The Comparative Performance of Q-type and Dynamic Models of Firm Investment: Empirical Evidence from the UK

Eleni Angelopoulou ()

No 27, Working Papers from Bank of Greece

Abstract: In this paper two models of investment stemming from the neoclassical theory are derived in a unifying framework. The Q type models view the stock market valuation of a firm as an all-encompassing variable determining its investment decisions, while the Euler equation for investment highlights the dynamic nature of firms’ decisionmaking. A sample of 779 UK manufacturing companies listed in the London Stock Exchange in the period 1971-1990 is used to compare the empirical fit of the two different models of investment. Despite a number of difficulties, the Q model appears to be empirically superior delivering the desirable consistency between theory and data.

Keywords: Empirical investment models; Euler equation for investment; Q model (search for similar items in EconPapers)
JEL-codes: E22 C23 D92 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2005-09
View list of references View citations in EconPapers

Downloads: (external link)
http://www.bankofgreece.gr/BogEkdoseis/Paper200527.pdf Full Text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bog:wpaper:27

Access Statistics for this paper

More papers in Working Papers from Bank of Greece
Contact information at EDIRC.
Series data maintained by Christina Tsochatzi ().