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Revisions of investment plans and the stock market rate of return

Schankerman, Mark (1991) Revisions of investment plans and the stock market rate of return. EI/5. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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Abstract

This paper explores the sources of uncertainty that cause firms to revise their capital investment plans and the stock market to revise its valuation of those firms. A simple method is developed to decompose the uncertainty governing revisions in investment plans and the stock market rate of return into micro, sectoral and aggregate components, and to measure the degree of heterogeneity in micro responses to common disturbances. The method is applied to a panel data set of fims in the U.S. economy for the period 1950-1973. The empirical results show that the capital investment decision is governed primarily by idiosyncratic uncertainty, but common disturbances are more important for movements in the stock market rate of return.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk/
Additional Information: © 1991 Mark Schankerman
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: EI/5
Date Deposited: 06 Mar 2008 08:57
URL: http://eprints.lse.ac.uk/3735/

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