We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost … identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we consider a … empirical fact that equity returns in the two sectors are not correlated with output. …

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost … identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we onsider a … empirical fact that equity returns in the two sectors are not correlated with output. …

major intermediate input into expanding plant capacity, investment goods, is coutercyclical. The ratio of these prices is … Tobin's q. We interpret the fact that Tobin's q differs from unity at all reflects that there are diminishing returns to … expanding plant capacity by installing investment goods (`adjustment costs'). Also, its numerator and denominator have such …