Did Real-Estate Collateral Drive Corporate Investment??
(This short summary omits a lot of detail in the paper.)
|Key Regression Spec Aspect||Coefficient||Interpretation|
|capex/lagppe ← redol/lagppe + FE||+0.074||Result in Chaney-Sraer-Thesmar (AER 2012).|
|capex/lagppe ← 1/lagppe + FE||+0.127||Absurd variable. (capex trends up with lagppe.)|
|1.0/lagppe ← redol/lagppe + FE||+0.204||Absurd variable. (redol trends up with lagppe.)|
|Δ(capex/lagppe) ← Δ(redol/lagppe)||+0.185||Year-by-Year changes in both num and denom.|
|(Δcapex)/lagppe ← (Δredol)/lagppe||-0.102||Numerator-only association is not positive!|
capex = capital expenditures
redol = real-estate dollar vallue
lagppe = lagged property, plant, and equipment
FE = fixed effects (and more).
Δ is the year-to-year change in the variable.
Ergo: Most CST regressions suffered from spurious mechanical correlation due to shared year-to-year (steady) increases in ppe in the dependent and independent variables. (A few regressions suffered from spurious non-mechanical trend-induced correlations for firms with vs firms without real-estate.)