Do stock price bubbles influence corporate investment?
By: Simon Gilchrist, Charles P. Himmelberg, Gur Huberman.
Contributors: Himmelberg, Charles P.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10537; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10537.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Stocks -- Prices.; Investments.
Description: "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"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 1/13/2005.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.