Journal article
Investment Functions with q in the Presence of Unobserved Persistent Shocks
Journal of financial and quantitative analysis
02/13/2026
DOI: 10.1017/S0022109026102695
Abstract
We study the classical relationship between a firm’s investment and q, for which an unobserved persistent shock is an important factor in the investment decision. In our setting, besides the potential measurement problem of q, controlling for the unobserved shock becomes a new challenge. We develop an estimation method that addresses both econometric issues given timing and information set assumptions. Using 16,256 unique public firms in the U.S. from 1975 to 2021, we find that q remains a significant factor of investment even after controlling for the unobserved shock and measurement error.
Details
- Title: Subtitle
- Investment Functions with q in the Presence of Unobserved Persistent Shocks
- Creators
- Kyoo il Kim - Michigan State UniversitySuyong Song - University of IowaJiawei (Brooke) Wang - Miami University
- Resource Type
- Journal article
- Publication Details
- Journal of financial and quantitative analysis
- DOI
- 10.1017/S0022109026102695
- ISSN
- 0022-1090
- eISSN
- 1756-6916
- Publisher
- CAMBRIDGE UNIV PRESS
- Number of pages
- 68
- Language
- English
- Electronic publication date
- 02/13/2026
- Academic Unit
- Economics; Finance
- Record Identifier
- 9985139478002771
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