Equity Market or Bond Market—Which Matters the Most for Investment? Revisiting Tobin’s q Theory of Investment

Abstract

Recent experience seems to have shown that credit markets are more important than equity markets for investment and macrodynamics. This paper examines the effect of Tobin's equity q and bond q on investment. More specifically we study the role of Tobin's equity (usual) q, average q and bond q for aggregate investment over the period 1953: Q4-2011: Q1. Employing bond q and equity q, or alternatively bond q and average q, shows that these variables are very relevant in explaining investment. Yet, the time scale matters too. Examining the relationship of these variables over a long time scale, at low frequencies, we can show that the combination of bond q and average q are the most significant determinants of aggregate investment. Moreover, for the longer time scale the two variables, bond q and average q, result in the highest goodness of fit demonstrating good in-sample forecasting properties. As to the individual determinants of aggregate investment over the period 1953: Q4-2011: Q1, bond q is by far the most influential variable at all frequencies since it always has the highest correlation with investment and this correlation is always statistically significant. Similarly, the greater significance of average q, as compared to equity q, is probably an outcome of the financing instruments for investment.

De-risking of green investments through a green bond market – Empirics and a dynamic model

“…Moreover, there is evidence that the bond market, instead of the equity market, explains better the investment behavior of firms (Philippon, 2009;Semmler & Mateane, 2012).…”

PENGARUH PROFITABILITAS,LIKUIDITAS, LEVERAGE, UKURAN PERUSAHAAN, JAMINAN DAN UMUR OBLIGASI TERHADAP PERINGKAT OBLIGASI (Studi Empiris Pada Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia Periode 2015-2018)

“…Berdasarkan jenis sumbernya, dana atau modal dapat diperoleh dari lingkungan internal perusahaan maupun dari lingkungan eksternal perusahaan. Pada lingkungan internal perusahaan dapat menggunakan laba ditahan yang merupakan hasil operasional periode sebelumnya, sedangkan pada lingkungan eksternal perusahaan dapat memperoleh dana melalui pasar modal (Semmler dan Mateane, 2012).Sebuah perusahaan dapat menerbitkan instrumen keuangan di pasar modal dalam upaya memperoleh dana. Undang-Undang Pasar Modal No.…”