The forward looking information content of equity and bond markets for aggregate investments

Marco Gallegati and James B. Ramsey

Journal of Economics and Business, 2014, vol. 75, issue C, 24 pages

Abstract: The literature on aggregate investment has recently shifted attention away from the stock market in favor of the bond market as a consequence of the disappointing empirical results of stock market's Q and the ability of credit spreads to forecast investment and output growth. In this paper we examine the different information content of Tobin's Q and corporate bond spread for aggregate investments in the US by means of wavelet analysis. The evidence shows that equity and bond markets’ information contents are complementary each other rather than alternative. In particular, a progressive shift in the respective contributions of stock market's Q and the relative price of corporate bonds for aggregate investments emerges when moving from higher to lower scales, the contribution of stock market's Q being predominant at higher scales, whereas that of the relative price of corporate bonds has a tendency to increase as the time scale decreases.

Keywords: Wavelet analysis; Q theory; Stock market prices; Corporate bond prices (search for similar items in EconPapers)
JEL-codes: C14 C29 C52 E22 E44 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0148619514000289
Full text for ScienceDirect subscribers only

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: https://EconPapers.repec.org/RePEc:eee:jebusi:v:75:y:2014:i:c:p:1-24

DOI: 10.1016/j.jeconbus.2014.04.002

Access Statistics for this article

Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter

More articles in Journal of Economics and Business from Elsevier
Bibliographic data for series maintained by Catherine Liu ().