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.)


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