What Explains the Lagged Investment Effect?

Sergio Rebelo (), Janice Eberly and Nicolas Vincent

No 8309, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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, Eichenbaum and Evans (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.

Keywords: Cash flow; Tobin's q (search for similar items in EconPapers)
JEL-codes: E2 (search for similar items in EconPapers)
Date: 2011-04
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Citations: View citations in EconPapers (13)

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Related works:
Journal Article: What explains the lagged-investment effect? (2012)
Working Paper: What Explains the Lagged Investment Effect? (2011)
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