fundamental value. Our model predicts that managers respond to bubbles by issuing new equity and increasing capital expenditures … investment - results that are consistent with the model's predictions. -- investment ; stock market ; bubble ; dispersion …

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 …