eprintid: 17780 rev_number: 18 eprint_status: archive userid: 600 dir: disk0/00/01/77/80 datestamp: 2009-11-06 17:23:10 lastmod: 2015-07-23 09:37:47 status_changed: 2009-11-06 17:23:10 type: working_paper metadata_visibility: show item_issues_count: 0 creators_name: Aghion, P. creators_name: Stein, J.C. creators_id: PAGHI04 creators_id: title: Growth vs. margins: destabilizing consequences of giving the stock market what it wants ispublished: pub subjects: 12000 divisions: F24 note: Please see http://eprints.ucl.ac.uk/17716/ a version published in The Journal of Finance abstract: We develop a multi-tasking model in which a firm can devote its efforts either to increasing sales growth, or to improving per-unit profit margins by, e.g., cutting costs. If the firm's manager is concerned with the current stock price, she will tend to favor the growth strategy at those times when the stock market is paying more attention to performance on the growth dimension. Conversely, it can be rational for the stock market to weight observed growth measures more heavily when it is known that the firm is following a growth strategy. This two-way feedback between firms' business strategies and the market's pricing rule can lead to purely intrinsic fluctuations in sales and output, creating excess volatility in these real variables even in the absence of any external source of shocks. date: 2004-12 publisher: National Bureau of Economic Research official_url: http://www.nber.org/papers/w10999 vfaculties: VSHS oa_status: green language: eng primo: open primo_central: open_green lyricists_name: Aghion, P lyricists_id: PAGHI04 full_text_status: public series: NBER Working Papers number: 10999 place_of_pub: Cambridge, US citation: Aghion, P.; Stein, J.C.; (2004) Growth vs. margins: destabilizing consequences of giving the stock market what it wants. (NBER Working Papers 10999). National Bureau of Economic Research: Cambridge, US. Green open access document_url: https://discovery.ucl.ac.uk/id/eprint/17780/1/17780.pdf