Surprise, Surprise - Measuring Firm-level Investment Innovations

Ruediger Bachmann and Atanas Hristov
Authors registered in the RePEc Author Service: Steffen Elstner ()

No 9894, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Firms expect certain investment expenditures. Firms realize certain investment expenditures. The difference is an investment surprise. With the help of the IFO Investment Survey for the German manufacturing sector we measure firms? (quantitative) investment expectations and firms? (quantitative) investment realizations on a yearly basis and construct a panel of firm-level investment innovations. This paper documents its cross-sectional and time-series properties and thus provides direct, econometrics-free quantitative discipline on the idiosyncratic shock processes used in structural heterogeneous-firm models. We find: 1) there is excess kurtosis in investment innovations, but no significant skewness; 2) the cross-sectional average of investment innovations is procyclical; 3) the cross-sectional dispersion of investment innovations is countercyclical; 4) the cross-sectional skewness and kurtosis of investment innovations is largely acyclical; 5) the cross-sectional average of the firm-individual time series volatility of investment innovations is countercyclical and highly positively correlated with the cross-sectional dispersion of investment innovations; 6) measures of firm-idiosyncratic risk have sizeable fluctuations, in the range of aggregate investment fluctuations.

Keywords: Firm data; Expectation errors; Higher moments; Idiosyncratic shocks; investment; Survey data (search for similar items in EconPapers)
JEL-codes: E20 E22 E30 E32 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Surprise, surprise – Measuring firm-level investment innovations (2017)
Working Paper: Surprise, Surprise - Measuring Firm-Level Investment Innovations (2014)
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