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Bond vs stock market's Q: Testing for stability across frequencies and over time

  • Gallegati, Marco
  • Ramsey, James B.

In this paper we revisit the evidence recently provided by Philippon (2009) about the relationship among bond market's Q, stock market's Q and aggregate investments for the US. Specifically, we analyze the stability of the relationship between aggregate investment and the two measures of Q across frequencies and over time. We find that the relationship between aggregate investment and stock market's Q, in contrast to that with bond market's Q, is both frequency-dependent and time-varying. Both the successfulness of bond market's Q and the poor performance of the usual Tobin's Q can be explained by taking into account stability across frequencies of the first and instability over time of the latter.

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Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 24 (2013)
Issue (Month): C ()
Pages: 138-150

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Handle: RePEc:eee:empfin:v:24:y:2013:i:c:p:138-150
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