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Do bubbles lead to overinvestment? : a revealed preference approach

Chirinko, Robert S.; Schaller, Huntley - 2011

firms in making their investment decisions. We use a revealed preference approach that relies on the pattern of investment … spending - combined with investment theory - to estimate the discount rates used by managers. The standard story predicts that … firms with high stock prices and good investment opportunities should have discount rates that do not differ systematically …

Persistent link: https://www.econbiz.de/10009153871

Fundamentals, misvaluation, and investment : the real story

Chirinko, Robert S.; Schaller, Huntley - 2006

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 …

Persistent link: https://www.econbiz.de/10009736657

Fundamentals, misvaluation, and investment : the real story

Chirinko, Robert S.; Schaller, Huntley - 2006

Persistent link: https://www.econbiz.de/10003425629

Financial cycles and co-movements between the real economy, finance and asset price dynamics in large-scale crises

Punzi, Maria Teresa - 2016

We empirically analyze asset price boom-bust cycles over a long-run period of 1896-2014 for the U.S., the Netherlands, Norway and Sweden. We focus on macro-financial linkages to understand if these are common phenomena during financial crises, or if the linkage was simply amplified during the...

Persistent link: https://www.econbiz.de/10011446571

Stock Market Wealth Effects in an Estimated DSGE Model for Hong Kong

Funke, Michael - 2009

This paper develops and estimates an open economy dynamic stochastic general equilibrium (DSGE) model of the Hong Kong economy. The model features short-run price rigidities generated by monopolistic competition and staggered reoptimisation. The model is enhanced with wealth effects due to stock...

Persistent link: https://www.econbiz.de/10013155755

Monetary policy and asset price overshooting: a rationale for the Wall/Main Street disconnect

Caballero, Ricardo J.; Simsek, Alp - 2022

We analyze optimal monetary policy and its implications for asset prices, when aggregate demand has inertia and responds to asset prices with a lag. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (asset prices are initially pushed above their...

Persistent link: https://www.econbiz.de/10013093040

Speculative Bubbles and Financial Crisis

Wang, Pengfei - 2009

Why are asset prices so much more volatile and so often detached from their fundamental values? Why does the bursting of financial bubbles depress the real economy? This paper addresses these questions by constructing an infinite-horizon heterogeneous agent general equilibrium model with...

Persistent link: https://www.econbiz.de/10013158843

Implications of Return Predictability for Consumption Dynamics and Asset Pricing

Favero, Carlo A. - 2018

Two broad classes of consumption dynamics - long-run risks and rare disasters - have proven successful in explaining the equity premium puzzle when used in conjunction with recursive preference. We show that bounds a-la Gallant, Hansen and Tauchen (1990) that restrict the volatility of the...

Persistent link: https://www.econbiz.de/10012938615

Monetary Policy and Asset Price Overshooting : A Rationale for the Wall/Main Street Disconnect

Caballero, Ricardo J. - 2020

We analyze optimal monetary policy when asset prices influence aggregate demand with a lag (as is well documented). In this context, as long as the central bank's main objective is to minimize the output gap, the central bank optimally induces asset price overshooting in response to the...

Persistent link: https://www.econbiz.de/10012825816

Frontiers of Macrofinancial Linkages

Claessens, Stijn - 2018

The Great Financial Crisis of 2007-09 confirmed the vital importance of advancing our understanding of macrofinancial linkages, the two-way interactions between the real economy and the financial sector. The crisis was a bitter reminder of how sharp fluctuations in asset prices, credit and...

Persistent link: https://www.econbiz.de/10012929483

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