@article{9bdc88d45e40440faa511c36e8e444c5,
title = "Noisy stock prices and corporate investment",
abstract = "Firms significantly reduce their investment in response to nonfundamental drops in the stock price of their product-market peers. We argue that this results stems from managers{\textquoteright} limited ability to filter out the noise in the stock prices when using them as signals about their investment opportunities. Ensuing losses of capital investment and shareholders{\textquoteright} wealth are economically large and even affect firms 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.",
author = "Olivier Dessaint and Thierry Foucault and Laurent Fr{\'e}sard and Adrien Matray",
note = "Funding Information: For helpful comments, we thank Alice Bonaime, Don Bowen, Markus Brunnermeier, Evan Dudley, Alex Edmans, Michael Faulkender, Harrison Hong, Larry Glosten, Xavier Giroud, Itay Goldstein, Alexander Gorbenko, Robin Greenwood, Denis Gromb, Wei Jiang, Pete Kyle, Max Maksimovic, Rich Mathews, Gregor Matvos, Ryan Peters, Clemens Otto, Gordon Phillips, Andrei Shleifer, Adi Sunderam, Sheridan Titman, Fabio Verona, Jeffrey Wurgler, Motohiro Yogo, and Wei Xiong and seminar participants at various institutions and conferences. We thank Jerry Hoberg and Gordon Phillips for sharing their TNIC data, and Jerry Hoberg and Max Maksimovic for sharing their text-based financing constraints data. This work was supported by the Investissements d{\textquoteright}Avenir Labex [ANR-11-IDEX-0003/Labex Ecodec/ANR-11-LABX-0047 to T. F.] and the Julis-Rabinowitz Center for Public Policy and Finance [to A. M.]. All errors are the authors alone. Supplementary data can be found on The Review of Financial Studies Web site. Send correspondence to Adrien Matray, Princeton University, 20 Washington Hall, Princeton, NJ 08544; telephone: (609) 258-3000. E-mail: amatray@princeton.edu. Funding Information: This work was supported by the Investissements d?Avenir Labex [ANR-11-IDEX-0003/Labex Ecodec/ANR-11-LABX-0047 to T. F.] and the Julis-Rabinowitz Center for Public Policy and Finance [to A. M.]. Publisher Copyright: {\textcopyright} The Author(s) 2018. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.",
year = "2019",
month = jul,
day = "1",
doi = "10.1093/rfs/hhy115",
language = "English (US)",
volume = "32",
pages = "2625--2672",
journal = "Review of Financial Studies",
issn = "0893-9454",
publisher = "Oxford University Press",
number = "7",
}