Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Finance | Finance | 2014
Thesis number: 14535
Estimating investment without asset prices - European evidence
|Title:||Estimating investment without asset prices - European evidence|
|Year:||2014 Language: eng|
|Department:||Department of Finance|
|Index terms:||rahoitus; financing; investoinnit; investment; sijoitukset; investments; käyttäytyminen; behaviour|
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Gala and Gomes (2012)'s new investment model with the inclusion of firm size and sales/ cash flows as the key state variables has proved to be far superior to the traditional investment model based on Tobin's Q linear quadratic equation. Overall, Gala and Gomes's parsimonious state variable polynomial is able to account for more than four times as much as Tobin's Q of the total explained variation in investment.
Even though the European market, which is the focused targets in this study, is relatively less developed than the US market, our initial expectation is still to achieve more or less similar results to that of the two authors. Any positive result from our study would undoubtedly help strengthen and lend additional support to the validation of Gala and Gomes' model.
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