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Title:	Growth Versus Margins: Destabilizing Consequences of Giving the Stock Market What it Wants
Author:	Stein, Jeremy; Aghion, Philippe Note: Order does not necessarily reflect citation order of authors.
Citation:	Aghion, Philippe, and Jeremy C. Stein. 2008. Growth versus margins: Destabilizing consequences of giving the stock market what it wants. Journal of Finance 63, no. 3: 1025-1058.
Full Text & Related Files:	aghion_growthvsmargins.pdf (373.3Kb; PDF)
Abstract:	We develop a model in which a firm can devote effort either to increasing sales growth, or to improving per-unit profit margins. If the firm's manager cares about the current stock price, she will favor the growth strategy when the market pays more attention to growth numbers. Conversely, it can be rational for the market to weight growth measures more heavily when it is known that the firm is following a growth strategy. This two-way feedback between firms' strategies and the market's pricing rule can lead to excess volatility in real variables, even absent any external shocks.
Published Version:	http://dx.doi.org/10.1111/j.1540-6261.2008.01351.x
Terms of Use:	This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page:	http://nrs.harvard.edu/urn-3:HUL.InstRepos:3660730

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• FAS Scholarly Articles [5171]
  Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University

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