Information, Investment, and the Stock Market: A Study of Investment Revision Data of Japanese Manufacturing Industries

29 Pages Posted: 18 Jan 2007

See all articles by Kazuo Ogawa

Kazuo Ogawa

Osaka University - Institute of Social and Economic Research (ISER)

Kazuyuki Suzuki

Meiji University

Date Written: January 2007

Abstract

We examined investment behavior in the Japanese manufacturing ndustry using investment revision data to analyze investment behavior from a fresh angle. We tested the martingale investment hypothesis and then the q-theory of investment by looking at the response of stock return and investment to news arriving at firms. The martingale hypothesis was generally accepted, and we also found evidence for the validity of the q-theory hypothesis. Investment was responsive to profit rate revision and sales revision, but stock return responded only to profit rate revision. Further investigation revealed that investment was also motivated by xpansion of market share for sales, especially for industries with rapid technological progress.

Keywords: Investment revision, martingale, stock return, q theory, market share

JEL Classification: E22, E44

Suggested Citation

Ogawa, Kazuo and Suzuki, Kazuyuki, Information, Investment, and the Stock Market: A Study of Investment Revision Data of Japanese Manufacturing Industries (January 2007). Available at SSRN: https://ssrn.com/abstract=957977 or http://dx.doi.org/10.2139/ssrn.957977

Kazuo Ogawa (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
+81 6 6879 8570 (Phone)

Kazuyuki Suzuki

Meiji University

1-1 Kanda Surugadai
Surugadai, Chiyoda, 101-8301
Japan