Investment Behavior, Observable Expectations, and Internal Funds

Posted: 20 Jul 1998

See all articles by Jason G. Cummins

Jason G. Cummins

Brevan Howard Asset Management LLP

Kevin A. Hassett

American Enterprise Institute (AEI)

Stephen D. Oliner

American Enterprise Institute

Date Written: 1995

Abstract

We use earnings forecasts from securities analysts to construct more accurate measures of the fundamentals that affect the expected returns to investment. Using a variety of econometric techniques, including semi-parametric estimators, we find that investment responds significantly--in both economic and statistical terms--to our new measures of fundamentals. With our controls for expected future profits, we find that internal funds are uncorrelated with investment spending, even for selected subsamples of firms--those paying no dividends and those without bond ratings--that have been found to be "liquidity constrained" in previous studies.

JEL Classification: C14, C23, D92, E22

Suggested Citation

Cummins, Jason Gustav and Hassett, Kevin A. and Oliner, Stephen D., Investment Behavior, Observable Expectations, and Internal Funds (1995). Available at SSRN: https://ssrn.com/abstract=42578

Jason Gustav Cummins (Contact Author)

Brevan Howard Asset Management LLP ( email )

London, SW1Y 6XA
United Kingdom

Kevin A. Hassett

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
202.862.7157 (Phone)
202.862.7177 (Fax)

Stephen D. Oliner

American Enterprise Institute ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
2024195205 (Phone)

HOME PAGE: http://www.aei.org/scholar/stephen-d-oliner/

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