Posted: 30 Sep 2013
Date Written: September 30, 2013
This study investigates how credit spread dynamically responds to the change in aggregate Tobin’s q ratio. The VAR results from analyzing quarterly data from 1951 Q4 to 2012 Q4 reveal that credit spread drops significantly following the shock to the change in aggregate Tobin’s q ratio. There is not a response feedback from credit spread to the changes in aggregate Tobin’s q ratio. The variance decomposition results show that the change in aggregate Tobin’s q forecasts about 1.91%, 13.29% and 16.42% at the 2-quarter, 4-quarter and 8-quarter horizons respectively.
Keywords: Credit spread, Tobin’s q ratio, VAR
JEL Classification: G12, G14, G17
Suggested Citation: Suggested Citation
Sum, Vichet, Credit Spread and Aggregate Tobin's Q (September 30, 2013). Available at SSRN: https://ssrn.com/abstract=2333317