Investment Behavior, Observable Expectations, and Internal Funds

The authors use earnings forecasts from securities analysts to construct a new measure of the neoclassical fundamentals that drive investment. They find that investment responds significantly--in both economic and statistical terms--to our new measure of fundamentals. In addition, they find that cash flow is uncorrelated with investment spending, even for firms that have been found to be “liquidity constrained” in previous studies. Taken together, the results cast doubt on the common interpretation of cash-flow effects in empirical investment equations using Brainard-Tobin average q.

Download file Revised Draft, September 1, 2002.

Download file Original Draft, March 31, 1999.

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

  • Phone: 202-862-7157
    Email: khassett@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202-862-5862
    Email: emma.bennett@aei.org

 

Stephen D.
Oliner
  • Stephen D. Oliner is a resident scholar at the American Enterprise Institute (AEI) and a senior fellow at the University of California, Los Angeles (UCLA) Ziman Center for Real Estate.

    Oliner joined AEI after spending more than 25 years at the Federal Reserve Board. An economist by training, Oliner held a number of high-level positions at the Fed and was closely involved in the Fed's analysis of the US economy and financial markets. Since leaving the Fed, Oliner has become well known for his analysis of US monetary policy and has maintained an active research agenda that focuses on real estate issues and the US economy’s growth potential.  He is coprincipal developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.

    Oliner has a Ph.D. and an M.S. in economics from the University of Wisconsin. He received a B.A. in economics from the University of Virginia.

  • Phone: 202.419.5205
    Email: stephen.oliner@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202.419.5212
    Email: emily.rapp@aei.org

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