The Stock Market and Investment Harvard
This PDF has contents related to Stock Trading. In this paper, they try 
to address empirically the broader question of how the stock market affects 
investment. They identify four theories that explain the correlation between 
stock returns and subsequent investment. The first says that the stock market is 
a passive predictor of future activity that managers do not rely on to make 
investment decisions. The second theory says that, in making investment 
decisions, managers rely on the stock market as a source of information, which 
may or may not be correct about future fundamentals. The third theory, which is 
perhaps the most common view of the stock market's influence, says that the 
stock market affects investment through its influence on the cost of funds and 
external financing. Finally, the fourth theory says that the stock market exerts 
pressure on investment quite aside from its informational and financing role, 
because managers have to cater to investors' opinions in order to protect their 
livelihood.
Author(s): Randall Morck, University of 
Alberta, Andrei Shleifer, Harvard University, Robert W. Vishny, University of 
Chicago
 59 Pages
59 Pages