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Do Stock Price Bubbles Influence Corporate Investment? / Simon Gilchrist, Charles P. Himmelberg, Gur Huberman.
- Format:
- Book
- Author/Creator:
- Gilchrist, Simon.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w10537.
- NBER working paper series no. w10537
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2004.
- Summary:
- Building on recent developments in behavioral asset pricing, we develop a model in which dispersion of investor beliefs under short-selling constraints drives a firm's stock price above its fundamental value. Managers optimally respond to the stock market bubble by issuing new equity. The bubble reduces the user-cost of capital and increase real investment. Using the variance of analysts' earnings forecasts as a proxy for the dispersion of investor beliefs, we find strong empirical support for the model's key prediction that increases in dispersion cause increases in new equity issuance, Tobin's Q, and real investment.
- Notes:
- Print version record
- June 2004.
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