What Moves Investment Growth?

Larraín, B., Chen, L., Da, Z.

2016 | Larraín, B., Chen, L., Da, Z.

Journal of Money, Credit and Banking

IF-2015 : 1,356 |

AI-2015 : 1,657

What Moves Investment Growth?

We use accounting identities to decompose unexpected changes in investment growth into surprises to current cash-flow growth and stock returns, and revisions of expectations about future cash-flow growth and future discount rates. Using a vector autoregressive model we find that current cash-flow surprises account for the largest element of the variance decomposition. Investment growth and current cash-flow surprises are negatively correlated with news about future cash-flow growth, which can be expected from persistent productivity shocks and decreasing returns to scale. We find little evidence of a discount rate channel for investment since return terms are small and have unintuitive signs.

Publicado en: Journal of Money, Credit and Banking

Artículo: ISI , Finanzas