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An Alternative Perspective on Tobin's Q and Aggregate Investment Expenditure

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Author Info

  • Mark J. Holmes

    (Department of Economics, Waikato University, New Zealand)

Abstract

This study provides new evidence on the relationship between Tobin's Q and private investment. Using a testing procedure advocated by Bierens applied to US data, both series are found to be stationary around a nonlinear deterministic trend and are co-trended insofar as they share a common nonlinear deterministic trend.

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Bibliographic Info

Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

Volume (Year): 9 (2010)
Issue (Month): 1 (April)
Pages: 23-28

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Handle: RePEc:ijb:journl:v:9:y:2010:i:1:p:23-28

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Postal: 100 Wenhwa Road, Seatwen, Taichung
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Related research

Keywords: Tobin's Q; investment; nonlinear trend; co-trend;

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References

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  1. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
  2. Simon Price & Christoph Schleicher, 2005. "Returns To Equity, Investment And Q: Evidence From The Uk," Manchester School, University of Manchester, vol. 73(s1), pages 32-57, 09.
  3. Bierens, Herman J., 1997. "Nonparametric cointegration analysis," Journal of Econometrics, Elsevier, vol. 77(2), pages 379-404, April.
  4. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  5. Camarero, Mariam & Ordonez, Javier, 2006. "Is there a nonlinear co-movement in the EU countries' unemployment?," Economics Letters, Elsevier, vol. 93(2), pages 157-162, November.
  6. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  7. Bierens, Herman J., 1997. "Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the US price level and interest rate," Journal of Econometrics, Elsevier, vol. 81(1), pages 29-64, November.
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Cited by:
  1. Gallegati, Marco & Ramsey, James B., 2013. "Bond vs stock market's Q: Testing for stability across frequencies and over time," Journal of Empirical Finance, Elsevier, vol. 24(C), pages 138-150.
  2. Gallegati, Marco & Ramsey, James B., 2013. "Structural change and phase variation: A re-examination of the q-model using wavelet exploratory analysis," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 60-73.

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