Journal of Economics and Business 75 (2014) 1–24 Contents lists available at ScienceDirect Journal of Economics and Business The forward looking information content of equity and bond markets for aggregate investments Marco Gallegati a,∗ , James B. Ramsey b a Department of Economics and Social Sciences, Faculty of Economics, “G. Fuà”, Polytechnic University of Marche, Piazzale Martelli 8, 60121 Ancona, Italy b Department of Economics, New York University, 269 Mercer Street, 10003, New York, NY, USA a r t i c l e i n f o Article history: Received 16 May 2013 Received in revised form 17 April 2014 Accepted 22 April 2014 JEL classification: C14 C29 C52 E22 E44 Keywords: Wavelet analysis Q theory Stock market prices Corporate bond prices a b s t r a c t The literature on aggregate investment has recently shifted atten- tion away from the stock market in favor of the bond market as a consequence of the disappointing empirical results of stock mar- ket’s Q and the ability of credit spreads to forecast investment and output growth. In this paper we examine the different informa- tion content of Tobin’s Q and corporate bond spread for aggregate investments in the US by means of wavelet analysis. The evidence shows that equity and bond markets’ information contents are complementary each other rather than alternative. In particular, a progressive shift in the respective contributions of stock market’s Q and the relative price of corporate bonds for aggregate investments emerges when moving from higher to lower scales, the contribution of stock market’s Q being predominant at higher scales, whereas that of the relative price of corporate bonds has a tendency to increase as the time scale decreases. © 2014 Elsevier Inc. All rights reserved. 1. Introduction Empirical works testing Tobin’s Q theory (Tobin, 1969) have generally adopted the stock market value of corporate equity as a proxy of the shadow value of capital by assuming that the observable ∗ Corresponding author. Tel.: +39 071 2207114; fax: +39 071 2207102. E-mail address: marco.gallegati@univpm.it (M. Gallegati). http://dx.doi.org/10.1016/j.jeconbus.2014.04.002 0148-6195/© 2014 Elsevier Inc. All rights reserved.