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Investment Plans and Stock Returns

  • Owen Lamont

Capital expenditure plans at the beginning of the year, from a US government survey of firms, explain more than three quarters of the variation in real annual aggregate investment growth between 1948 and 1993. The negative correlation of contemporaneous investment and stock returns is explained by the negative correlation of planned investment and subsequent stock returns. Unexpected revisions to aggregate investment (actual minus plan) within a year are essentially unrelated to current stock returns, and positively related to current profits. Revisions to industry investment are positively related to industry-specific stock returns and to aggregate profits.

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File URL: http://www.nber.org/papers/w6973.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6973.

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Date of creation: Feb 1999
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Publication status: published as Lamont, Owen A. "Investment Plans And Stock Returns," Journal of Finance, 2000, v55(6,Dec), 2719-2745.
Handle: RePEc:nbr:nberwo:6973
Note: EFG
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  1. Campbell, John Y & Mei, Jianping, 1993. "Where Do Betas Come From? Asset Price Dynamics and the," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 567-92.
  2. Mark Schankerman, 1991. "Revisions of Investment Plans and the Stock Market Rate of Return," STICERD - Economics of Industry Papers 05, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Blanchard, O. & Rhee, C. & Summers, L., 1990. "The Stock Market, Profit And Investment," RCER Working Papers 233, University of Rochester - Center for Economic Research (RCER).
  4. Barro, Robert J, 1990. "The Stock Market and Investment," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 115-31.
  5. Dexter Keezer & Robert Ulin, 1960. "Observations on the Predictive Quality of Mcgraw-Hill Surveys of Business' Plans for New Plants and Equipment," NBER Chapters, in: The Quality and Economic Significance of Anticipations Data, pages 369-386 National Bureau of Economic Research, Inc.
  6. Mark Schankerman, 1991. "Revisions of investment plans and the stock market rate of return," LSE Research Online Documents on Economics 3735, London School of Economics and Political Science, LSE Library.
  7. Chen, Nai-Fu, 1991. " Financial Investment Opportunities and the Macroeconomy," Journal of Finance, American Finance Association, vol. 46(2), pages 529-54, June.
  8. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  9. Richard W. Kopcke, 1993. "Forecasting investment with models and surveys of capital spending," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 47-69.
  10. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1990. "The Stock Market and Investment: Is the Market a Sideshow?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 157-216.
  11. Cochrane, John H, 1991. " Production-Based Asset Pricing and the Link between Stock Returns and Economic Fluctuations," Journal of Finance, American Finance Association, vol. 46(1), pages 209-37, March.
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