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I'm reading this great intermediate level macroeconomic book by Carlin and Soskice, and on page 31, when discussing the empirical studies testing the Tobin's q theory to explain the behaviour of investment (excess sensitivity of investment over GDP), the following sentence appears « A testable prediction of the q theory is that current cash flow should have no impact on investment. The reason is that forward-looking firms should take into account any credit constraints that they face: these should already be incorporated into the stock market valuation, Q.»

Note that 'Q' is the average q, and 'q' is the marginal q. (sorry for the redundancy)

My question is the following: This incorporation of information is only valid for semi-strong efficient markets hypothesis (EMH), i.e., only for publicly foreseeable changes, which are the one incorporated in the market valuation, right? It seems that the average Q theory fundamentally depends on that semi-strong EMH. If the EMH fails, so will the average Q theory?

Any help would be appreciated.

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