What explains the lagged-investment effect?

Janice Eberly, Sergio Rebelo () and Nicolas Vincent

Journal of Monetary Economics, 2012, vol. 59, issue 4, 370-380

Abstract: The best predictor of current investment at the firm level is lagged investment. This lagged-investment effect is empirically more important than the cash-flow and Q effects combined. We show that the specification of investment adjustment costs proposed by Christiano et al. (2005) predicts the presence of a lagged-investment effect and that a generalized version of their model is consistent with the behavior of firm-level data from Compustat.

Date: 2012
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Related works:
Working Paper: What Explains the Lagged Investment Effect? (2011)
Working Paper: What Explains the Lagged Investment Effect? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:59:y:2012:i:4:p:370-380

DOI: 10.1016/j.jmoneco.2012.05.002

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