Noisy Stock Prices and Corporate Investment

By Olivier Dessaint, Thierry Foucault, L. Frésard, Adrien Matray. The Review of financial studies, 2018

161 citations recorded by the source corpus.

Firms significantly reduce their investment in response to non-fundamental drops in the stock price of their product-market peers. We argue that this result arises because of managers' limited ability to filter out the noise in stock prices when using them as signals about their investment opportunities. The resulting losses of capital investment and shareholders' wealth are economically large, and affect even firms that are not facing severe financing constraints or agency problems. Our findings offer a novel perspective on how stock market inefficiencies can affect the real economy, even in the absence of financing or agency frictions.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/fe2ac8f4faa3bf3a406b4d4ed19fb4b08aa6388c

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In Finance

1. Changjun Zhou
2. Jiayu Qiu
3. Bin Wang

Citations in the corpus

• Forecasting stock prices with long-short term memory neural network based on attention mechanism (2020, background): “Due to the complex and volatile stock market and various trading restrictions, the stock prices we see are noisy.[28] At the same time, the financial time series is nonstationary and exhibits the overlapping of useful signals and noise, which makes traditional denoising ineffective.”