Expectations and Investment / Nicola Gennaioli, Yueran Ma, Andrei Shleifer.

Format:

Book

Author/Creator:

Gennaioli, Nicola.

Contributor:

National Bureau of Economic Research.

Ma, Yueran.

Shleifer, Andrei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21260.

NBER working paper series no. w21260

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs' expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin's Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to extrapolative structure of expectations and suggesting that expectations may not be rational. This evidence, like earlier findings in finance, points to the usefulness of data on actual expectations for understanding economic behavior.

Notes:

Print version record

June 2015.