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

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  • Kazuo Ogawa
  • Kazuyuki Suzuki

Abstract

We examined investment behavior in the Japanese manufacturing industry 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 expansion of market share for sales, especially for industries with rapid technological progress.

Suggested Citation

  • Kazuo Ogawa & Kazuyuki Suzuki, 2007. "Information, Investment, and the Stock Market: A Study of Investment Revision Data of Japanese Manufacturing Industries," ISER Discussion Paper 0681, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0681
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    Cited by:

    1. Sakai, Hirotsugu, 2020. "Did financing constraints cause investment stagnation in Japan after the 1990s?," Journal of Corporate Finance, Elsevier, vol. 64(C).

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