Estimating investment without asset prices - European evidence

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School of Business | Master's thesis
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2014

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Rahoituksen laitos
Department of Finance

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Rahoitus
Finance

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en

Pages

62

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Abstract

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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https://urn.fi/URN:NBN:fi:aalto-201609083571

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[gradu] Kauppakorkeakoulu / BIZ