Measuring Marginal q
Event details
| Date | 31.10.2014 |
| Hour | 10:30 › 12:00 |
| Speaker | Vito GALA (London Business School) |
| Location | |
| Category | Conferences - Seminars |
Using asset prices I estimate the marginal value of capital under general assumptions about technology and preferences. The state-space measure of marginal q relies on the joint measurability of the value function, i.e. .firm market value, and its underlying firm state variables. Unlike existing methodologies, the state-space measure of marginal q requires only very few general restrictions on the stochastic discount factor and the firm investment technology, and it uses only market values maximally correlated with the underlying state variables implied by the model. Consistently with a large class of neoclassical investment models, I construct the state-space marginal q using the firm capital stock and profitability shocks. I show how this new measure of real investment opportunities increases the correlation with investment and provides more plausible and robust estimates of capital adjustment costs.
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