What explains the lagged-investment effect?

Janice Eberly, Sergio Rebelo*, Nicolas Vincent

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

43 Scopus citations

Abstract

The best predictor of current investment at the firm level is lagged investment. This lagged-investment effect is empirically more important than the cash-flow and . Q effects combined. We show that the specification of investment adjustment costs proposed by . Christiano et al. (2005) predicts the presence of a lagged-investment effect and that a generalized version of their model is consistent with the behavior of firm-level data from Compustat.

Original languageEnglish (US)
Pages (from-to)370-380
Number of pages11
JournalJournal of Monetary Economics
Volume59
Issue number4
DOIs
StatePublished - May 1 2012

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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