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The Bond Market's q

The Quarterly journal of economics, 2009-08, Vol.124 (3), p.1011-1056 [Peer Reviewed Journal]

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Title:
The Bond Market's q
Author: Philippon, Thomas
Subjects: Bond markets ; Business structures ; Capital investments ; Capital structure ; Cash flow ; Corporate bonds ; Economic models ; Economic theory ; Financial investments ; Financial leverage ; Relative prices ; Securities prices ; Studies
Is Part Of: The Quarterly journal of economics, 2009-08, Vol.124 (3), p.1011-1056
Description: I propose an implementation of the q-theory of investment using bond prices instead of equity prices. Credit risk makes corporate bond prices sensitive to future asset values, and q can be inferred from bond prices. With aggregate U.S. data, the bond market's q fits the investment equation six times better than the usual measure of q, it drives out cash flows, and it reduces the implied adjustment costs by more than an order of magnitude. Theoretical interpretations for these results are discussed.
Publisher: Oxford: MIT Press
Language: English
Identifier: ISSN: 0033-5533
EISSN: 1531-4650
DOI: 10.1162/qjec.2009.124.3.1011
CODEN: QJECAT
Source: Alma/SFX Local Collection

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