Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279701 
Year of Publication: 
2023
Series/Report no.: 
BoF Economics Review No. 3/2023
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We look for a forecasting model for private investments in Finland. As explanatory variables, we use different proxies of Tobin's Q and cash flow as well as these series decomposed to different frequency components. The forecasts are produced using OLS and National Accounts and Financial Accounts data. We find that the models that include a proxy of Q, cash flow or both most often result in smaller RMSFE's compared to the benchmark AR-model, but the differences are not statistically significant. Frequency decomposition can improve the model performance, even though the difference is not statistically significant either. The most accurate forecasts are achieved by approximating Tobin's Q with the ratio of firm's market value and the sum of physical and intangible capital stocks.
Subjects: 
forecasting
investment
Tobin's Q
discrete wavelets
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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