We estimate a dynamic investment model in which firms finance with equity, cash, or debt. Misvaluation affects equity … activities come from investment, dividends, or net cash. The model fits a broad set of data moments in large heterogeneous … than investment. The investment responses are strongest for small firms but nonetheless modest. Managers' rational …

We quantify how much nonfundamental movements in stock prices affect firm decisions. We estimate a dynamic investment … investment, dividends, or net cash. The model fits a broad set of data moments in large heterogeneous samples and across … industries. Firms respond to misvaluation by adjusting financing more than by adjusting investment. Managers' rational responses …