Is real investment fully determined by fundamentals or is it sometimes affected by stock market misvaluation? We … introduce three new tests that: measure the reaction of investment to sales shocks for firms that may be overvalued; use Fama … misvaluation into standard investment equations to estimate the quantitative effect of misvaluation on investment. Overall, the …

business fixed investment? The case of Japan is particularly interesting because of the dramatic movements in the Japanese … these questions. Fist, we examine financing and investment patterns to gauge firms' reactions to the 1980s stock market run … investment. Third, we use a linear projection to decompose stock market prices into fundamental and bubble components, allowing …