Noisy stock prices and corporate investment

Olivier Dessaint, Thierry Foucault, Laurent Frésard, Adrien Matray

Research output: Contribution to journalArticlepeer-review

72 Scopus citations


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’ 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’ 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.

Original languageEnglish (US)
Pages (from-to)2625-2672
Number of pages48
JournalReview of Financial Studies
Issue number7
StatePublished - Jul 1 2019

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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